Question

Question 2 Your answer is partially correct. Try again. Here are selected 2018 transactions of Pharoah Corporation. Jan. 1 June 30 Dec. 31 Retired a piece of furniture that was purchased on January 1, 2008. The furniture cost $68,010 and had a useful life of 10 years with no residual value. Sold equipment that was purchased on January 1, 2016. The equipment cost $36,810 and had a useful life of 3 years with no residual value. The equipment was sold for $4,560 cash. Sold a vehicle for $9,460 cash. The vehicle cost $25,980 when it was purchased on January 1, 2015, and was depreciated based on a 5-year useful life with a $3,140 residual value. Pharoah Corporation uses straight-line depreciation. Prepare all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.)

Answer 1

Answer -

Date	Account Titles and Explanation	Debit	Credit
Jan. 01	Accumulated depreciation-Furniture	$68010
	Furniture		$68010
Jun. 30	Depreciation expense	$6135
	Accumulated depreciation-Equipment		$6135
	(To record depreciation expense for 2018)
Jun. 30	Accumulated depreciation-Equipment	$30675
	Cash	$4560
	Loss on disposal of equipment	$1575
	Equipment		$36810
	(To record sale of equipment)
Dec. 31	Depreciation expense	$4568
	Accumulated depreciation-Equipment		$4568
	(To record depreciation expense for 2018)
Dec. 31	Accumulated depreciation-Equipment	$18272
	Cash	$9460
	Vehicle		$25980
	Gain on sale of vehicle		$1752
	(To record sale of vehicle)

Calculation:

June 30

Using Straight-line depreciation method:

Depreciation expense = (Cost of asset - Residual value) / Useful life

Depreciation expense = ($36810 - $0) / 3 years

Depreciation expense = $12270 (Annual)

Here, Equipment was purchased on January 1 , 2016 and sold on June 30, 2018, that means equipment used for 2.5 years

So, Accumulated depreciation for 2.5 years = $12270 * 2.5 years = $30675

Loss on disposal of equipment = Cost of equipment - (Accumulated depreciation + Cash received)

Loss on disposal of equipment = $36810 - ($30675 + $4560)

Loss on disposal of equipment = $1575

Dec. 31

Using Straight-line depreciation method:

Depreciation expense = (Cost of asset - Residual value) / Useful life

Depreciation expense = ($25980 - $3140) / 5 years

Depreciation expense = $4568 (Annual)

Here, Vehicle was purchased on January 1 , 2015 and sold on Dec. 31, 2018, that means vehicle used for 4 years

So, Accumulated depreciation for 4 years = $4568 * 4 years = $18272

Gain on sale of vehicle = (Accumulated depreciation + Cash received) - Cost of vehicle

Gain on sale of vehicle = ($18272 + $9460) - $25980

Gain on sale of vehicle = $1752