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Chapter 9: 8SE (page 488)

On October 31, 2018, Alternative Landscapes discarded equipment that had a cost of \(26,920. Accumulated Depreciation as of December 31, 2017, was \)25,000. Assume annual depreciation on the equipment is $1,920. Journalize the partial-year depreciation expense and disposal of the equipment.

Short Answer

Expert verified

The loss on disposal of equipment is $320 and the required journal entries are passed.

Step by step solution

01

Computation of Gain or loss

PartialYearDepreciation=AnnualDepreciation脳TimePeriod=$1,920脳1012=$1,600

Gainor(loss)=MarketValueofassetreceived-Lessbookvalue-AccumulatedDepreciation=0-($26,920-$26,600)=($320)

02

Journal entry to record partial year depreciation and disposal of the equipment

Journal Entry

Date

Accounts and Explanation

Debit ($)

Credit ($)

Oct 31

Depreciation Expense- Equipment

1,600

Accumulated Depreciation- Equipment

1,600

(To record depreciation on equipment)

Oct 31

Accumulated Depreciation- Equipment

26,600

Loss on disposal of Equipment

320

Equipment

26,920

(Discarded the equipment)

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Most popular questions from this chapter

Whitney Plumb Associates surveys American eating habits. The company鈥檚 accounts include Land, Buildings, Office Equipment, and Communication Equipment, with a separate Accumulated Depreciation account for each asset. During 2018, Whitney Plumb completed the following transactions:

Jan. 1 Purchased office equipment, \(117,000. Paid \)77,000 cash and financed the remainder with a note payable.

Apr. 1 Acquired land and communication equipment in a lump-sum purchase. Total cost was \(350,000 paid in cash. An independent appraisal valued the land at \)275,625 and the communication equipment at \(91,875.

Sep. 1 Sold a building that cost \)520,000 (accumulated depreciation of \(285,000 through December 31 of the preceding year). Whitney Plumb received \)390,000 cash from the sale of the building. Depreciation is computed on a straight-line basis. The building has a 40-year useful life and a residual value of \(25,000.

Dec. 31 Recorded depreciation as follows:

Communication equipment is depreciated by the straight-line method over a five-year life with zero residual value. Office equipment is depreciated using the double-declining-balance method over five years with a \)2,000 residual value.

Record the transactions in the journal of Whitney Plumb Associates.

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