Question

4. Tarrier, Inc., has the following PPE account: Land, Building, and Equipment, with a separate accumulated depreciation account for each of these except land. Tarrier completed the following transactions: (12marks) Traded in equipment with accumulated depreciation of $65,000(cost of$ 139,000) for similar new equipment with a cash cost of $ 179,000. Received a trade-in allowance of $73,000 on the old equipment and paid $106,000 in cash Jan 2 Sold a building that had a cost of $635,000 and had accumulated depreciation of $145,000 through December 31 of the preceding year. Depreciation is computed on a straight-line basis. The building has a 40-year useful life and a residual value of $275,000. Tarrier received $135,000 cash and a $350,500 note receivable. Oct 29 Purchase land and a building for a single price of $360,000. An independent appraisal valued the land at $108,900 and the building at $254,100 Jun 30 Dec 31 Recorded depreciation as follows: Equipment has an expected useful life of 4 years and an estimated residual value of 5% of cost. Depreciation is computed on the double-declining- balance method. Depreciation on buildings is computed by the straight-line method. The new building carries a 20-year useful life and a residual value equal to 10% of its cost. Requirement: Record the transactions in Tarrier, Inc's Journal.

Answer 1

Journal Entries :-

Date	Particulars	Debit($)	Credit($)
Jan 2	New Equipment	179000
	Accumulated Depreciation on old Equipment	65000
	Loss on Exchange of Equipment	1000
	Old Equipment		139000
	Cash		106000
	(Being record Exchange of Equipment)
Jun 30	Cash	135000
	Note Receivable	350500
	Accumulated Depreciation on Building	145000
	Loss on Sale of Building	4500
	Building		635000
	(Being record sale of building on loss)
Oct 29	Land	108900
	Building	254100
	Cash		360000
	Unrealised Profit		3000
	(Being record purchase land and building)
Dec.31	Depreciation (179000*50%)	89500
	Accumulated Depreciation on Equipment		89500
	(Being Depreciation Record on Equipment by Double declining depreciation method)
Dec.31	Depreciation ((635000*(100%-10%))/20 year)	28575
	Accumulated Depreciation on Building		28575
	(Being Depreciation Record on Building by Straight line Method)

Double Declining Depreciation Rate = 2 * Straight line Rate

= 2 * (1/4 year)

= 2 * 0.25

= 0.50 or 50%