![College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)](https://www.bartleby.com/isbn_cover_images/9781305666160/9781305666160_largeCoverImage.gif)
DISPOSITION OF ASSETS: JOURNALIZING Mitchell Parts Co. had the following plant asset transactions during the year:
1. Assets discarded or sold:
Jan. | 1 | Motor #12, which had a cost of $2,800 and |
8 | Motor #8, which had a cost of $4,400 and accumulated depreciation of $4,000, was sold for $200. | |
14 | Motor #16, which had a cost of $5,600 and accumulated depreciation of $5,400, was sold for $450. |
2. Assets exchanged or traded in:
Feb. | 1 | Motor #6, which had a cost of $6,000 and accumulated depreciation of $4,800, was traded in for a new motor (#22) with a fair market value of $7,000. The old motor and $5,600 in cash were given for the new motor. |
9 | Motor #9, which had a cost of $5,500 and accumulated depreciation of $5,000, was traded in for a new motor (#23) with a fair market value of $6,500. The old motor and $6,200 in cash were given for the new motor. |
REQUIRED
Prepare general
![Check Mark](/static/check-mark.png)
Journalize the transactions related to plant assets in the books of Corporation MP.
Explanation of Solution
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
- Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
Journalize the transactions related to plant assets in the books of Corporation MP.
Transaction on January 1:
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
January | 1 | Accumulated Depreciation–Motor 12 | 2,800 | |||
Motor 12 | 2,800 | |||||
(Record discarding of Motor 12) |
Table (1)
Description:
- Accumulated Depreciation–Motor 12 is a contra-asset account. Since the motor is discarded, the accumulated depreciation balance is reversed to reduce the balance in the account, hence, the account is debited.
- Motor 12 is an asset account. Since motor is discarded, asset account decreased, and a decrease in asset is credited.
Working Note 1:
Determine the gain or loss recognized on the discarding of asset.
Transaction on January 8:
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
January | 8 | Cash | 200 | |||
Accumulated Depreciation–Motor 8 | 4,000 | |||||
Loss on Sale of Motor 8 | 200 | |||||
Motor 8 | 4,400 | |||||
(Record sale of Motor 8) |
Table (2)
Description:
- Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
- Accumulated Depreciation–Motor 8 is a contra-asset account. Since the motor is sold, the accumulated depreciation balance is reversed to reduce the balance in the account, hence, the account is debited.
- Loss on Sale of Motor 8 is an expense account. Since losses and expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
- Motor 8 is an asset account. Since motor is sold, asset account decreased, and a decrease in asset is credited.
Working Note (2):
Compute book value of asset on the date of sale.
Working Note (3):
Compute gain or loss on sale of asset.
Note: Refer to Working Note 2 for value and computation of book value.
Transaction on January 14:
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
January | 14 | Cash | 450 | |||
Accumulated Depreciation–Motor 16 | 5,400 | |||||
Motor 18 | 5,600 | |||||
Gain on Sale of Motor 16 | 250 | |||||
(Record sale of Motor 16) |
Table (3)
Description:
- Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
- Accumulated Depreciation–Motor 16 is a contra-asset account. Since the motor is sold, the accumulated depreciation balance is reversed to reduce the balance in the account, hence, the account is debited.
- Motor 16 is an asset account. Since motor is sold, asset account decreased, and a decrease in asset is credited.
- Gain on Sale of Motor 16 is a revenue account. Since gains and revenues increase equity, equity value is increased, and an increase in equity is credited.
Working Note (4):
Compute book value of asset on the date of sale.
Working Note (5):
Compute gain or loss on sale of asset.
Note: Refer to Working Note 4 for value and computation of book value.
Transaction on February 1:
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
February | 1 | Motor 22 (New) | 7,000 | |||
Accumulated Depreciation–Motor 6 (Old) | 4,800 | |||||
Motor 6 (Old) | 6,000 | |||||
Cash | 5,600 | |||||
Gain on Exchange of Motors | 200 | |||||
(Record exchange of old motor for a new motor) |
Table (4)
Description:
- Motor 22 (New) is an asset account. Since new machine is brought into the business, asset account increased, and an increase in asset is debited.
- Accumulated Depreciation– Motor 6 (Old) is a contra-asset account. Since the machine is sold, the accumulated depreciation balance is reversed to reduce the balance in the account, hence, the account is debited.
- Motor 6 (Old) is an asset account. Since old machine is exchanged, asset account decreased, and a decrease in asset is credited.
- Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.
- Gain on Exchange of Motors is a revenue account. Since gains and revenues increase equity, equity value is increased, and an increase in equity is credited.
Working Note (6):
Compute book value of old asset on the date of exchange.
Working Note (7):
Compute trade-in-allowance.
Working Note (8):
Compute gain (loss) on exchange of asset.
Note: Refer to Working Notes 6 and 7 for value and computation of both values.
Transaction on February 9:
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
February | 9 | Motor 23 (New) | 6,500 | |||
Accumulated Depreciation–Motor 9 (Old) | 5,000 | |||||
Loss on Exchange of Motors | 200 | |||||
Motor 9 (Old) | 5,500 | |||||
Cash | 6,200 | |||||
(Record exchange of old motor for a new motor) |
Table (5)
Description:
- Motor 23 (New) is an asset account. Since new machine is brought into the business, asset account increased, and an increase in asset is debited.
- Accumulated Depreciation– Motor 9 (Old) is a contra-asset account. Since the machine is sold, the accumulated depreciation balance is reversed to reduce the balance in the account, hence, the account is debited.
- Loss on Exchange of Motors is an expense account. Since losses and expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
- Motor 9 (Old) is an asset account. Since old machine is exchanged, asset account decreased, and a decrease in asset is credited.
- Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited.
Working Note (9):
Compute book value of old asset on the date of exchange.
Working Note (10):
Compute trade-in-allowance.
Working Note (11):
Compute gain (loss) on exchange of asset.
Note: Refer to Working Notes 9 and 10 for value and computation of both values.
Want to see more full solutions like this?
Chapter 18 Solutions
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
- need help this questionsarrow_forwardSelected comparative financial statements of Korbin Company follow. Sales KORBIN COMPANY Comparative Income Statements For Years Ended December 31 2021 2020 $ 512,008 $ 392,240 2019 $ 272,200 Cost of goods sold 308,229 245,542 174,208 Gross profit 203,779 146,698 97,992 Selling expenses 72,705 54,129 35,930 Administrative expenses 46,081 34,517 22,593 Total expenses 118,786 88,646 58,523 Income before taxes .84,993 58,052 39,469 Income tax expense 15,809 11,901 8,012 Net income $ 69,184 $ 46,151 $ 31,457 KORBIN COMPANY Comparative Balance Sheets Assets Current assets Long-term investments Plant assets, net Total assets Liabilities and Equity Current liabilities Common stock Other paid-in capital Retained earnings December 31 2021 2020 2019 $ 54,370 0 $ 36,390 600 $ 48,645 3,870 99,436 90,776 53,339 Total liabilities and equity $ 153,806 $ 127,766 $ 105,854 $ 22,456 $ 19,037 $ 18,524 68,000 68,000 50,000 8,500 8,500 5,556 54,850 32,229 31,774 $ 153,806 $ 127,766 $ 105,854arrow_forwardprovide correct answer mearrow_forward
- general accountingarrow_forwardE3-17 (Algo) Calculating Equivalent Units, Unit Costs, and Cost Assigned (Weighted-Average Method) [LO 3-2] Vista Vacuum Company has the following production Information for the month of March. All materials are added at the beginning of the manufacturing process. Units . • Beginning Inventory of 3,500 units that are 100 percent complete for materials and 28 percent complete for conversion. 14,600 units started during the period. Ending Inventory of 4,200 units that are 14 percent complete for conversion. Manufacturing Costs Beginning Inventory was $20,500 ($10,100 materials and $10,400 conversion costs). Costs added during the month were $28,400 for materials and $51,500 for conversion ($26.700 labor and $24,800 applied overhead). Assume the company uses Weighted-Average Method. Required: 1. Calculate the number of equivalent units of production for materials and conversion for March. 2. Calculate the cost per equivalent unit for materials and conversion for March. 3. Determine the…arrow_forwardNonearrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337794756/9781337794756_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337690881/9781337690881_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305654174/9781305654174_smallCoverImage.gif)