
Concept explainers
1.
To prepare:
1.

Explanation of Solution
Record cost of machine purchased.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Jan 2 | Machine | 178,000 | ||
Cash | 178,000 | |||
(To record the cash purchases) |
Table (1)
- Machine is an asset account. Machine account increases as the new machine is bought to the business, hence the asset increases and all the assets are debited as their values increases.
- Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.
Record Additional cost spent on machinery in order to put it to use.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Jan 3 | Machine | 2,840 | ||
Cash | 2,840 | |||
(To record the additional cost) |
Table (2)
- Machine is an asset account. Machine account increases as the new machine is bought to the business, hence the asset increases and all the assets are debited as their values increases.
- Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.
Record additional cost
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Jan 3 | Machine | 1,160 | ||
Cash | 1,160 | |||
(To record the additional cost) |
Table (3)
- Machine is an asset account. Machine account increases as the new machine is bought to the business, hence the asset increases and all the assets are debited as their values increases.
- Cash account is an asset account. Cash account decreases as the amount paid to purchase the equipment has been paid in cash, hence the asset decreases and all the assets are credited as their values decreases.
Working Notes:
Computation of total cost of machinery:
Total cost of asset is $182,000.
2.
To prepare: Journal entries.
2.

Explanation of Solution
(a)
Record
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Dec 31 | Depreciation | 28,000 | ||
| 28,000 | |||
(To record the depreciation) |
Table(4)
- Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
- Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and increases as the depreciation is transferred to this account. This is the reason it is credited.
Working Notes:
The total value of machine is $182,000.
Computation of depreciation:
Depreciation that will be charged in first year is $28,000.
(b)
Record depreciation in the year of disposal.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Dec 31 | Depreciation | 28,000 | ||
Accumulated Depreciation | 28,000 | |||
(To record the depreciation) |
Table (5)
- Depreciation is an expense account. Depreciation account increases the balance of expense account and all the losses and expenses accounts are debited.
- Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and increases as the depreciation is transferred to this account. This is the reason it is credited.
The depreciation will remain the same throughout the five years as the method used for depreciation is straight line depreciation. Here, depreciation amount of depreciation remains the same throughout.
3.
To prepare: Journal entries.
3.

Explanation of Solution
(a)
Record the entry for sale of asset for $15,000.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Dec 31 | Cash | 15,000 | ||
Loss on disposal of machine | 27,000 | |||
Accumulated Depreciation | 140,000 | |||
Machinery | 182,000 | |||
(To record the sale of the asset) |
Table (6)
- Cash is an asset account. Cash account increases as the cash has been received by the company on the sale of the asset, hence the asset increases and all the assets are debited as their values increases.
- Loss on disposal is an expense account. Loss account is increasing and is debited as all the expenses and losses are debited according to the rules.
- Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and decreases as the account has been closed as the asset has been sold off. This is the reason it is debited.
- Machine is an asset account. Machine account decreases as the as the asset has been disposed off and all the assets are credited as their values decrease.
Working notes:
Computation of Accumulated Depreciation:
Accumulated Depreciation is $140,000.
Computation of the book value of the asset:
Book value of the asset is $42,000.
Computation of loss on sale of asset:
Hence, loss on sale of asset is $27,000.
b()
Record the sale of asset for $50,000.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Dec 31 | Cash | 50,000 | ||
Accumulated Depreciation | 140,000 | |||
Gain on sale | 8,000 | |||
Machinery | 182,000 | |||
(To record the sale of the asset) |
Table (7)
- Cash is an asset account. Cash account increases as the cash has been received by the company on the sale of the asset, hence the asset increases and all the assets are debited as their values increases.
- Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and decreases as the account has been closed as the asset has been sold off. This is the reason it is debited.
- Machine is an asset account. Machine account decreases as the as the asset has been disposed off and all the assets are credited as their values decrease.
- Gain on sale is an income account. Gain account increases and is credited as all the income and gains are credited as per the rules of accounts.
Working Notes:
Computation of gain on sale:
Gain on sale of asset is $8,000.
c
Record the entry for Asset destroyed in fire and collected $30,000 cash.
Date | Account Title and Explanation | Post ref | Debit ($) | Credit ($) |
Dec 31 | Cash | 30,000 | ||
Loss by fire | 12,000 | |||
Accumulated Depreciation | 140,000 | |||
Machinery | 182,000 | |||
(To record the sale of the asset) |
Table (8)
- Cash is an asset account. Cash account increases as the cash has been received by the company on the sale of the asset, hence the asset increases and all the assets are debited as their values increases.
- Loss by fire is an expense account. Loss account is increasing and is debited as all the expenses and losses are debited according to the rules.
- Accumulated Depreciation account is a contra asset account. Accumulated depreciation has a credit balance and decreases as the account has been closed as the asset has been sold off. This is the reason it is debited.
- Machine is an asset account. Machine account decreases as the as the asset has been disposed off and all the assets are credited as their values decrease.
Working Notes:
Computation of the loss by fire:
Hence, the loss by fire is $12,000.
Want to see more full solutions like this?
Chapter 8 Solutions
FINANCIAL & MANAGERIAL ACCOUNTING
- Questin 5arrow_forwardBelle Garments manufactures customized T-shirts for football teams. The business uses a perpetual inventory system and has a highly labour-intensive production process, so it assigns manufacturing overhead based on direct labour cost. The business operates at a profit margin of 33% on sales. Belle Garments expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2025. At the end of December 2024, Belle Line Garments reported work in process inventory of $93,980 - Job FBT 101 - $51,000 & Job FBT 102 - $42,980 The following events occurred during January 2025. i) Purchased materials on account, $388,000. The purchase attracted freight charges of $4,000 ii) Incurred manufacturing wages of $400,000 iii) Requisitioned direct materials and used direct labour in manufacturing. Job # FBT 101 FBT 102 FBT 103 FBT 104 Direct Materials $70,220 97,500 105,300 117,000 iv) Issued indirect materials to production, $30,000. Direct Labour $61,200…arrow_forwardThe trial balance for K and J Nursery, Incorporated, listed the following account balances at December 31, 2024, the end of its fiscal year: cash, $27,000; accounts receivable, $22,000; inventory, $36,000; equipment (net), $91,000; accounts payable, $25,000; salaries payable, $10,500; interest payable, $6,500; notes payable (due in 18 months), $41,000; common stock, $72,000. Determine the year-end balance in retained earnings for K and J Nursery, Incorporated.arrow_forward
- Brun Company produces its product through two processing departments: Mixing and Baking. Information for the Mixing department follows. Direct Materials Conversion Unit Percent Complete Percent Complete Beginning work in process inventory 7.500 Units started this period 104,500 Units completed and transferred out 100.000 Ending work in process inventory 12.000 100% 25% Beginning work in process inventory Direct materials Conversion $6.800 14.500 $21.300 Costs added this period Drect materials 116,400 Conversion Total costs to account for 1.067,000 1.183.400 $1.204.700 Required 1. Prepare the Mixing department's production cost report for November using the weighted average method Check (1) C$1.000 2. Prepare the November 30 journal entry to transfer the cost of completed units from Mixing to Bakingarrow_forwardNonearrow_forwardNot need ai solution please solve this general accounting questionarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





