Question

Ch. 9 Graded Assignments i Saved Help Save & Exit Submit 40 Check my work During the current year, Hitchcock Developers disposed of plant assets in the following transactions. 2 points eBook Feb. 10 office equipment costing $24,000 was given to a scrap dealer at no charge. At the date of disposal, accumulated depreciation on the office equipment amounted to $21,800. Apr. 1 Hitchcock sold land and a building to claypool Associates for $900,000, receiving $100,000 cash and a 5-year, 9 percent note receivable for the remaining balance. Hitchcock's records showed the following amounts: Land, $50,000; Building, $ 550,000; Accumulated Depreciation: Building (at the date of dispo Aug. 15 Hitchcock traded in an old truck for a new one. The old truck had cost $26,000, and its accumulated depreciation amounted to $18,000. The list price of the new truck was $38,000, but Hitchcock received a $10,000 trade-in allowance for the old truck and paid $28,000 in cash. Hitchcock includes trucks in its Vehicles account. Oct. 1 Hitchcock traded in its old computer system $15,000, and its accumulated depreciation amounted to $11,000. The new computer's list price was $8,000. Hitchcock accepted a trade-in allowance of $500 for the old computer system, paying $1,500 down in cash and issuing a 1-year, 8 percent note payable for the $6,000 balance owed. References Required: a. Prepare journal entries to record each of the disposal transactions. Assume that depreciation expense on each asset has been recorded up to the date of disposal. Thus, you need not update the accumulated depreciation figures stated in the problem. b. Do gains and losses on asset disposals affect gross profit?

Answer 1

a.	Date	General journal					Debit	Credit
	Feb 10.	Accumulated depreciation-Office equipment					21800
		Loss on disposal of office equipment				(24000-21800)	2200
		Office equipment						24000
		(Disposal of office equipment)
	Apr 1.	Cash					100000
		Note receivable				(900000-100000)	800000
		Accumulated depreciation-Building					250000
		Land						50000
		Building						500000
		Profit on sale of land and building				(Plug)		600000
		(Sold land and building)
	Aug 15.	Vehicles (New truck)					38000
		Accumulated depreciation-Vehicles					18000
		Loss on sale of vehicle				(Plug)	8000
		Vehicles (Old truck)						26000
		Cash						28000
		Allowance received						10000
		(Old truck traded for a new one)
	Oct 1.	Office equipment (New computer)					8000
		Accumulated depreciation-Office equipment					11000
		Loss on sale of office equipment					4000
		Office equipment (Old computer)						15000
		Cash						1500
		Note payable						6000
		Allowance received						500
		(Old computer traded for a new one)
b.	No.
	Gross profit=Sales-Cost of goods sold
	Gains and losses on disposal affects net profit and not gross profit