Question

Problem 11-9 (Algo) Straight-line depreciation; disposal; partial period; change in estimate [LO11-2, 11-5]

The property, plant, and equipment section of the Jasper Company’s December 31, 2020, balance sheet contained the following:

Property, plant, and equipment:
Land				$	116,000
Building	$	936,000
Less: Accumulated depreciation		(180,000	)		756,000
Equipment		163,000
Less: Accumulated depreciation		?			?
Total property, plant, and equipment					?

The land and building were purchased at the beginning of 2016. Straight-line depreciation is used and a residual value of $36,000 for the building is anticipated.

The equipment is comprised of the following three machines:

Machine	Cost			Date Acquired		Residual Value				Life (in Years)
101	$	53,800		1/1/2018		$	6,600			8
102		85,000		6/30/2019			7,600			9
103		24,200		9/1/2020			2,600			8

The straight-line method is used to determine depreciation on the equipment. On March 31, 2021, Machine 102 was sold for $59,000. 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

Solution:

1.

Annual depreciation period till from Acquisition Machine [(Cost -salvage value)/Life] date to Dec. 31, 2020 101 5,900 36 months 102 8,600 18 months 103 2,700 4 months Total Accumulated Depreciation on equipment Accumulated Depreciation 17,700 12,900 900 31,500

Part 2. & part 4 :

Credit Debit $ 2,150 Date Account Titles March 31,2021 Depreciation Expense Accumulated depreciation-Equip. (To record depreciation on machine 102) $ 2,150 March 31, 2021 Cash Accumulated Depreciation-Equip. Loss on sale of equipment Equipment (To record sale of machine 102) $ $ $ 59,000 15,050 10,950 $ 85,000

3. Loss on sale of machine 102 = Cash received from sale - Book value of machine on March 31,2020

   = $59,000 - (Cost - Accumulated depreciation till march 31, 2020 )

= $59,000 - [$85,000 - (12,900+2,150) ]

= - $10,950

= $10,950 (loss)

Part. 5

Date	Account Titles	Debit	Credit
DEC. 31, 2021	Depreciation expense	$56,750
	Accumulated depreciation- Building		$36,000
	Accumulated depreciation-Equip.		$20,750

*Accumulated depreciation-building (above ) = $180,000 (given) / period from 1 Jan. 2016 to Dec.31, 2020

= $180,000 / 5 = $36,000

**Accumulated dep.-Equip. (above) = Annual depreciation on machine 101 and 103

   = Book value of machine 101/ remaining life in yr + $2,700

   = ($53,800-17,700) / 2 + 2,700 = $20,750