1. Explanation Prepare the journal entry to record the trade-in of the old motor-carrier for the new one. Date Account Title and Explanation Post Ref. Debit ($) Credit ($) January 1 Equipment (New) 128,000 Accumulated depreciation –Equipment 88,000 Equipment (Old) 140,000 Cash 65,000 Gain on exchange of Equipment 11,000 (To record the trade of motor-carrier equipment) Table (1) Working Notes: Calculate book value of old equipment. Book value of old equipment = { Cost of old equipment – Accumulated depreciation } = $140,000 –$88,000 = $52,000 Calculate gain (loss) on trade-in of old equipment for new equipment. Gain = Trade-in allowance–Book value of old equipment =$63,000–$52,000 =$11,000 Equipment (New) is an asset and it has increased. Thus, debit Equipment (New) account. Accumulated depreciation is a contra asset. It increases the value of asset account. Thus, debit Accumulated Depreciation. Equipment (Old) is an asset and there is a decrease in the value of the asset due to exchange. Thus, credit Equipment (Old). Cash is the current asset account, and it has decreased. Thus, credit cash account. Gain on Trade–in of Old Equipment is an income account. Income and gains increases the Equity account. Therefore, credit Gain on Trade–in of Old Equipment account. Journalize the transaction for the depreciation expense of the buildings. Date Account titles and explanation Post Ref. Debit ($) Credit ($) July 1 Depreciation expense–Buildings 6,500 Accumulated depreciation–Buildings 6,500 ( To record the depreciation expense on buildings) Table (2) Working Notes: Compute the depreciation expense. Depreciation = Acquisition cost – Residual value Useful life × Time period = $570,000–$50,000 40 years × 6 12 ( July to December ) =$6,500 Depreciation Expense is an expense account. Expenses decrease Equity value. Therefore, debit Depreciation Expense account. Accumulated Depreciation–Building is a contra-asset account and it would have a normal credit balance. Therefore, credit Accumulated Depreciation–Building account. Prepare the journal entry to record the sale of the building. Date Account Title and Explanation Post Ref. Debit ($) Credit ($) July 1 Cash 110,000 Note receivable 280,000 Accumulated depreciation–Building ( $ 270 , 000 + $ 6 , 500 ) 276,500 Building 570,000 Gain on sale of Building 96,500 (To record the sale of the building) Table (3) Working Notes: Calculate book value of the building. Book value of old equipment = { Cost of old equipment – Accumulated depreciation } = $570,000 – ( $ 270 , 000 + $ 6 , 500 ) = $570,000 − $ 276 , 500 = $ 293 , 500 Calculate gain (loss) on sale of the building. Gain = ( Sale price received by cash + Sale price received on note ) –Book value of the building = ( $110,000+$280,000 ) –$293,500 =$390,000 − $ 293 , 500 = $ 96 , 500 Cash is an asset account. The amount has increased because the sales amount is received. Therefore, debit Cash account. Note Receivable is an asset account. The amount has increased because the amount to be received has increased. Therefore, debit Note Receivable account. Accumulated Depreciation–Building is a contra-asset account. The amount of accumulated depreciation is closed by reversing the entry due to sale of building. Therefore, debit Accumulated Depreciation–Building account. Building is an asset account

Financial Accounting, Student Value Edition (4th Edition)

4th Edition

ISBN: 9780134114811

Author: Robert Kemp, Jeffrey Waybright

Publisher: PEARSON

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Chapter 8, Problem 47AP

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Record the transactions in Company RF’s journal.

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Chapter 8 Solutions

Financial Accounting, Student Value Edition (4th Edition)

Ch. 8 - Prob. 1DQ Ch. 8 - Prob. 2DQ Ch. 8 - Prob. 3DQ Ch. 8 - What is depreciation, and why is it used in...Ch. 8 - Prob. 5DQ Ch. 8 - Which depreciation method would be moot...Ch. 8 - Prob. 7DQ Ch. 8 - Prob. 8DQ Ch. 8 - Prob. 9DQ Ch. 8 - Prob. 10DQ

Ch. 8 - Prob. 1SC Ch. 8 - Prob. 2SC Ch. 8 - How should a capital expenditure for a long-term...Ch. 8 - Which depreciation method usually produces the...Ch. 8 - Prob. 5SC Ch. 8 - Prob. 6SC Ch. 8 - Prob. 7SC Ch. 8 - Prob. 8SC Ch. 8 - Prob. 9SC Ch. 8 - Prob. 10SC Ch. 8 - Prob. 11SC Ch. 8 - Prob. 12SC Ch. 8 - Prob. 1SE Ch. 8 - Long-term asset terms (Learning Objective 1) 5-10...Ch. 8 - Prob. 3SE Ch. 8 - Lump-sum purchase (Learning Objective 2) 5-10 min....Ch. 8 - Errors in accounting for long-term assets...Ch. 8 - Concept of depreciation (Learning Objective 3)...Ch. 8 - Depreciation methods (Learning Objective 3) 10-15...Ch. 8 - Depreciation methods (Learning Objective 3) 10-15...Ch. 8 - Prob. 9SE Ch. 8 - Prob. 10SE Ch. 8 - Prob. 11SE Ch. 8 - Prob. 12SE Ch. 8 - Prob. 13SE Ch. 8 - Prob. 14SE Ch. 8 - Prob. 15SE Ch. 8 - Other long term assets (Learning Objective 8) 5-10...Ch. 8 - Prob. 17SE Ch. 8 - Prob. 18AE Ch. 8 - Prob. 19AE Ch. 8 - Prob. 20AE Ch. 8 - Prob. 21AE Ch. 8 - Depreciation methods (Learning Objective 3) 15-20...Ch. 8 - Prob. 23AE Ch. 8 - Prob. 24AE Ch. 8 - Prob. 25AE Ch. 8 - Prob. 26AE Ch. 8 - Prob. 27AE Ch. 8 - Prob. 28AE Ch. 8 - Prob. 29AE Ch. 8 - Prob. 30AE Ch. 8 - Prob. 31AE Ch. 8 - Prob. 32BE Ch. 8 - Prob. 33BE Ch. 8 - Prob. 34BE Ch. 8 - Prob. 35BE Ch. 8 - Prob. 36BE Ch. 8 - Prob. 37BE Ch. 8 - Prob. 38BE Ch. 8 - Prob. 39BE Ch. 8 - Prob. 40BE Ch. 8 - Prob. 41BE Ch. 8 - Prob. 42BE Ch. 8 - Prob. 43BE Ch. 8 - Prob. 44BE Ch. 8 - Prob. 45BE Ch. 8 - Long-term asset costs and partial-year...Ch. 8 - Prob. 47AP Ch. 8 - Prob. 48AP Ch. 8 - Prob. 49AP Ch. 8 - Prob. 50AP Ch. 8 - Prob. 51AP Ch. 8 - Prob. 52AP Ch. 8 - Prob. 53BP Ch. 8 - Prob. 54BP Ch. 8 - Prob. 55BP Ch. 8 - Prob. 56BP Ch. 8 - Prob. 57BP Ch. 8 - Prob. 58BP Ch. 8 - Prob. 59BP Ch. 8 - Prob. 1CE Ch. 8 - Prob. 1CP Ch. 8 - Prob. 1CFSAP Ch. 8 - Prob. 1EIA Ch. 8 - Prob. 2EIA Ch. 8 - Prob. 1FA Ch. 8 - Prob. 1IA Ch. 8 - Prob. 1SBA Ch. 8 - Written Communication A client of yours notified...

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