Question

8A-18 8A-4. PEACH Winery purchased a wine press for $84.000 on January 1. 20xl. The press has a useful life of eight years and no salvage value at the end of the time. PEACH makes all the appropriate adjusting entries on December 31 of each year using straight line depreciation. More than four years later, on May 1, 20x5, PEACH sells the press for $36,000 cash. Required: 1. Calculate the accumulated depreciation on the press as of January 1, 20x5 and enter this as the beginning balance in the accumulated depreciation T- account. Then show the adjusting entries necessary to bring the depreciation up to date as of May 1 of the same year. 2. Show the entry necessary to record the sale of the press on May 1, 20x5.

Answer 1

Date Account Debit $ Cash Date Account May 1 20x5 New Wine Press Credit $ 20,000.00 20,000.00 Account Date Account May 1 20x5 Accumulated Depreciation bits Credit $ Depreciation Debit $ Date 3,500.00 3,500.00 Date Account Gain on Sale Debit $ Date Account May 1 20x5 Old Wine Press Credit $ 6,500.00 6,500.00 Credit $ 45,500.00 Date Account May 1 205 Cash May 1 20x5 Old Wine Press May 1 20x5 Gain on sale New Wine Press Debit $ Date Account 20,000.00 May 1 20x5 Accumulated Depreciation 84,000.00 6,500.00 May 1 20X5 Closing Balance 110,500.00 65,000.00 110,500.00 Please give positive ratings so I can keep answering. Thanks!

Peach Winery
Answer 8A-4				Accumulated Depreciation
Cost of Wine Press	84,000.00	A		Date	Account	Debit $	Date	Account	Credit $
Residual Value	-	B		May 1 20X5	Old Wine Press	45,500.00	Jan 1 20X5	Opening Balance	42,000.00
Depreciable Value	84,000.00	C=A-B					May 1 20X5	Depreciation Expense	3,500.00
Life	8.00	D				45,500.00			45,500.00
Annual depreciation	10,500.00	E=C/D
				Old Wine Press
Depreciation for 20X1	10,500.00			Date	Account	Debit $	Date	Account	Credit $
Depreciation for 20X2	10,500.00			Jan 1 20X5	Opening Balance	84,000.00	May 1 20X5	Accumulated Depreciation	45,500.00
Depreciation for 20X3	10,500.00						May 1 20X5	Cash	36,000.00
Depreciation for 20X4	10,500.00						May 1 20X5	Loss on sale	2,500.00
Accumulated Depreciation till 20X4	42,000.00	This is answer 1				84,000.00			84,000.00
Depreciation for 20X5 (4 months)	3,500.00
(Jan to April)				Cash
Total Accumulated Depreciation	45,500.00			Date	Account	Debit $	Date	Account	Credit $
Book Value as May 1, 20X5	38,500.00			May 1 20X5	Old Wine Press	36,000.00
Sell Value	36,000.00					36,000.00			-
Loss on sale	2,500.00
				Depreciation
Answer 2				Date	Account	Debit $	Date	Account	Credit $
Journal Entry	Account	Debit $	Credit $	May 1 20X5	Accumulated Depreciation	3,500.00
Date	Cash	36,000.00				3,500.00			-
May 1 20X5	Accumulated Depreciation	45,500.00
	Loss on sale	2,500.00		Loss on Sale
	Wine Press		84,000.00	Date	Account	Debit $	Date	Account	Credit $
		84,000.00	84,000.00	May 1 20X5	Old Wine Press	2,500.00
						2,500.00			-

Answer 8A-5
Total Accumulated Depreciation	45,500.00
Book Value as May 1, 20X5	38,500.00
Add: Cash paid	35,000.00
Less: Trade in Value	56,000.00
Loss on sale	17,500.00
Journal Entry	Account	Debit $	Credit $
Date	Accumulated Depreciation	45,500.00
May 1 20X5	New Wine Press	56,000.00
	Loss on sale	17,500.00
	Old Wine Press		84,000.00
	Cash		35,000.00
		119,000.00	119,000.00

Accumulated Depreciation
Date	Account	Debit $	Date	Account	Credit $
May 1 20X5	Old Wine Press	45,500.00	Jan 1 20X5	Opening Balance	42,000.00
			May 1 20X5	Depreciation Expense	3,500.00
		45,500.00			45,500.00
Old Wine Press
Date	Account	Debit $	Date	Account	Credit $
Jan 1 20X5	Opening Balance	84,000.00	May 1 20X5	Accumulated Depreciation	45,500.00
May 1 20X5	Cash	35,000.00	May 1 20X5	New Wine Press	56,000.00
			May 1 20X5	Loss on sale	17,500.00
		119,000.00			119,000.00
Cash
Date	Account	Debit $	Date	Account	Credit $
			May 1 20X5	New Wine Press	35,000.00
		-			35,000.00
Depreciation
Date	Account	Debit $	Date	Account	Credit $
May 1 20X5	Accumulated Depreciation	3,500.00
		3,500.00			-
Loss on Sale
Date	Account	Debit $	Date	Account	Credit $
May 1 20X5	Old Wine Press	17,500.00
		17,500.00			-
New Wine Press
Date	Account	Debit $	Date	Account	Credit $
May 1 20X5	Cash	35,000.00	May 1 20X5	Accumulated Depreciation	45,500.00
May 1 20X5	Old Wine Press	84,000.00	May 1 20X5	Loss on sale	17,500.00
			May 1 20X5	Closing Balance	56,000.00
		119,000.00			119,000.00

Answer 8A-6
Total Accumulated Depreciation	45,500.00
Book Value as May 1, 20X5	38,500.00
Add: Cash paid	20,000.00
Less: Trade in Value	65,000.00
Gain on sale	6,500.00
Journal Entry	Account	Debit $	Credit $
Date	Accumulated Depreciation	45,500.00
May 1 20X5	New Wine Press	65,000.00
	Old Wine Press		84,000.00
	Cash		20,000.00
	Gain on sale		6,500.00
		110,500.00	110,500.00

Accumulated Depreciation
Date	Account	Debit $	Date	Account	Credit $
May 1 20X5	Old Wine Press	45,500.00	Jan 1 20X5	Opening Balance	42,000.00
			May 1 20X5	Depreciation Expense	3,500.00
		45,500.00			45,500.00
Old Wine Press
Date	Account	Debit $	Date	Account	Credit $
Jan 1 20X5	Opening Balance	84,000.00	May 1 20X5	Accumulated Depreciation	45,500.00
May 1 20X5	Cash	20,000.00	May 1 20X5	New Wine Press	65,000.00
May 1 20X5	Gain on sale	6,500.00
		110,500.00			110,500.00