Question

Blossom Company had the following assets on January 1, 2022. Item Useful Life (in years) Salvage Value $0 10 Machinery Forklift Truck Cost $81,000 40,000 46,400 Purchase Date Jan 1, 2012 Jan 1, 2019 Jan 1, 2017 5 0 3,000 8 During 2022, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $13,000. The truck was discarded on December 31. Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on disposed assets. The company uses straight-line depreciation. All depreciation was up to date as of December 31, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.)

Answer 1

Answer -

Date	Account titles and Explanation	Debit	Credit
Jan. 01	Accumulated depreciation-Equipment	$81000
	Equipment		$81000
June 30	Depreciation expense (1)	$4000
	Accumulated depreciation-Equipment		$4000
	(To record depreciation expense on forklift)
June 30	Cash	$13000
	Accumulated depreciation-Equipment (2)	$28000
	Equipment		$40000
	Gain on disposal of plant assets (3)		$1000
	(To record sale of forklift)
Dec. 31	Depreciation expense (4)	$5425
	Accumulated depreciation-Equipment		$5425
	(To record depreciation expense on truck)
Dec. 31	Accumulated depreciation-Equipment (5)	$32550
	Loss on disposal of plant assets (6)	$13850
	Equipment		$46400
	(To record sale of truck)

Calculations :

(1)

Depreciation expense = (Book value - Salvage value) / Useful life

Depreciation expense = ($40000 - $0) / 5 = $8000 per year

So, for half year = $8000 * 6/12 = $4000

(2)

From Jan. 1, 2019 to June 30, 2022 i.e 3.5 years.

Accumulated depreciation = $8000 * 3.5 years = $28000

(3)

Gain on disposal of plant assets = Sale value + Accumulated depreciation - Book value

Gain on disposal of plant assets = $13000 + $28000 - $40000

Gain on disposal of plant assets = $1000

(4)

Depreciation expense = (Book value - Salvage value) / Useful life

Depreciation expense = ($46400 - $3000) / 8

Depreciation expense = $5425 per year

(5)

From Jan. 1, 2017 to Dec. 31, 2022 i.e 6 years.

Accumulated depreciation = $5425 * 6 years = $32550

(6)

Loss on disposal of plant assets = Book value - Accumulated depreciation

Loss on disposal of plant assets = $46400 - $32550

Loss on disposal of plant assets = $13850