Question

The property, plant, and equipment section of the Jasper Company's December 31, 2020, balance sheet contained the following: Property, plant, and equipment: Land Building Less: Accumulated depreciation Equipment Less: Accumulated depreciation Total property, plant, and equipment $ 752,000 (235,000 179, 250 $127,000 517,000 The land and building were purchased at the beginning of 2016. Straight-line depreciation is used and a residual value of $47,000 for the building is anticipated. The equipment is comprised of the following three machines: Life (in Years) Machine 101 102 103 Cost $63,700 76,600 38,950 Date Acquired 1/1/2018 6/30/2019 9/1/2020 Residual Value $ 7,700 8,700 3,700 10 The straight-line method is used to determine depreciation on the equipment. On March 31, 2021, Machine 102 was sold for $47,000. Early in 2021, the useful life of machine 101 was revised to five years in total, and the residual value was revised to zero. Required: 1. Calculate the accumulated depreciation on the equipment at December 31, 2020. 2. Prepare the journal entry to record 2021 depreciation on machine 102 up to the date of sale. 3. Calculate the gain or loss on the sale of machine 102. 4. Prepare the journal entry for the sale of machine 102. 5. Prepare the 2021 year-end journal entries to record depreciation on the building and remaining equipment.

Answer 1

Requirement 1:

Machine	Cost	-	Residual value	=	Depreciable value	/	Life (in years)	=	Depreciation per year	x	Years to Dec.31,2020	Accumulated depreciation
101	$63,700	-	$7,700	=	$56,000	/	8	=	$7,000	x	3	$21,000
102	$76,600	-	$8,700	=	$67,900	/	7	=	$9,700	x	1.5	$14,550
103	$38,950	-	$3,700	=	$35,250	/	10	=	$3,525	x	1.3	$4,583
Total	$179,250											$40,133

Requirement 2:

Date	Account title and explanation	Debit	Credit
Mar 31,2021	Depreciation expense (9,700 x (3/12))	$2,425
	Accumulated depreciation-Equipment		$2,425
	[To record depreciation expense on sold Equipment]

Requirement 3:

Sale value of the machine 102		$47,000
Book value:
Cost	$76,600
(-) Accumulated depreciation (14,550+2,425)	($16,975)	($59,625)
Gain(Loss) on the sale of Equipment		($12,625)

Loss is $12,625

Requirement 4:

Date	Account title and explanation	Debit	Credit
Mar 31,2021	Cash	$47,000
	Accumulated depreciation-Equipment	$16,975
	Loss on disposal of Equipment	$12,625
	Equipment		$76,600
	[To record sale of Equipment]

Requirement 5:

Date	Account title and explanation	Debit	Credit
Dec 31,2021	Depreciation expense	$71,875
	Accumulated depreciation-Building		$47,000
	Accumulated depreciation-Equipment		$24,875
	[To record depreciation expense]

Calculations:

i.If Accumulated depreciation for 5 Years (2016-2020) is $235,000 then the depreciation expense per year = (235,000/5) = $47,000

ii.

Machine 101
Cost	$63,700
(-) Accumulated depreciation	($21,000)
Book value as on Dec 31,2020	$42,700
÷ Remaining useful life (5 years - 3 years)	2 years
Depreciation expense	$21,350

Depreciation expense on Equipment at year end
Depreciation expense on Machine 101	$21,350
Depreciation expense on Machine 103	$3,525
Total depreciation	$24,875