Question

E10.22 (LO 4, 5) (Analysis of Subsequent Expenditures) The following transactions occurred during 2020. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year A building that cost $132,000 in 2003 is torn down to make room for a new building. The wrecking contractor was paid $5,100 and was permitted to keep all materials salvaged. Jan. 30 Machinery that was purchased in 2013 for $16,000 is sold for $2,900 cash, f.o.b. purchaser's plant. Freight of $300 is paid on the sale of this machinery. A gear breaks on a machine that cost $9,000 in 2012. The gear is replaced at a cost of $2,000. The replacement does not extend the useful life of the machine but does make the machine Mar. 10 Mar. 20 more efficient. A special base installed for a machine in 2014 May 18

Answer 1

General Journal Entries

Date	Account Title and Explanation	Debit	Credit
Jan 30	Accumulated Depreciation on Building	$ 112,200
	Loss on Disposal of Plant Asset	$24,900
	Buildings		$132,000
	Cash		$5,100
March 10	Accumulated Depreciation on Machinery	$ 11,200
	Cash ($2900 - $ 300)	$2,600
	Loss on Disposal of Plant Asset	$2,200
	Machinery		$16,000
March 20	Maintenance and Repairs Expenses	$2,000
	Cash		$2,000
May 18	Machinery	$5,500
	Accumulated Depreciation on Machinery	$2,100
	Loss on Disposable of Plant Asset	$1,400
	Cash		$5,500
	Machinery		$3,500
June 23	Maintenance and Repairs Expenses	$ 6,900
	Cash		$6,900

Working Note;

Jan 30 :   

# Accumulated Depreciation on Building = $132,000 * 5% = $6,600

= $6,600 * 17 years = $112,200

  ## Loss on disposal of plant = ($132,000 - $112,200) + 5,100 = $24,900

March 10 :

   # Accumulated Depreciation = $ 16,000 * 70% = $ 11,200

  # Loss on disposal of Plant= ($16,000 - $ 11,200) + $300 - $2,900 =$2,200

Mat 18 ;

# Accumulated Depreciation machinery = 60% * 3,500 = $ 2,100

​​​​​​​## Loss on disposal of Plant Asset = $3,500 - $2,100 = $1400