Question

Chapter 9 Disposal of Plant Asset examples 1. January 4, 2010 a piece of equipment was bought for $58,000 with a residual value of $4,000 and an estimated life of 9 years. (Use straight line method) The equipment was sold for $22,000 on March 23, 2016. Journalize the entries to update the partial year depreciation and sale dated March 23, 2016. 2. January 2, 2011 bought equipment for $96,000 with a residual value of $15,000 and an estimated life of 9 years. (Use the straight line method) The equipment was sold for S46,000 on June 1, 2016. Journalize the entries to update the partial year depreciation and sale dated June 1, 2016.

Answer 1

SOLUTION : 1
	CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD FOR MACHINE
	Purchase Cost of Machine	$                      58,000
	Less: Salvage Value	$                        4,000
	Net Value for Depreciation	$                      54,000
	Usefule life of the Assets	9 years
	Depreciation per year = Value for Depreciation / 9years =	$                        6,000
	Total Depreciation Per year =	$                        6,000
	CALCULATION OF BOOK VALUE OF ASSET AS ON MARCH 23, 2016
	Purchase Value of Equipment	$                      58,000
	Less:
	Depreciation from 2010 to 2015 (6 years X $ 6,000)	$                      36,000
	Depreciation for 3 months in year 2016 ($ 6,000 X 3 / 12 month)	$                        1,500
	Book Value of the Assets	$                      20,500
	CALCULATION OF GAIN OR LOSS ON SALES OF EQUIPMENT
	Sales Value =	$                      22,000
	Less: Book Value	$                      20,500
	Gain on sales pf Equipment	$                        1,500
Journal Entries
Date	Account Title and explanation	Debit	Credit
Mach 23, 2016	Depreciation expesnes	$                        1,500
	Accumulated Deprecaition - Equipment		$                       1,500
Mach 23, 2016	Cash	$                      22,000
	Accumulated Deprecaition - Equipment	$                      37,500
	Gain on sales of Equipment		$                       1,500
	Equipment		$                    58,000
SOLUTION : 2
	CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD FOR MACHINE
	Purchase Cost of Machine	$                      96,000
	Less: Salvage Value	$                      15,000
	Net Value for Depreciation	$                      81,000
	Usefule life of the Assets	9 years
	Depreciation per year = Value for Depreciation / 9years =	$                        9,000
	Total Depreciation Per year =	$                        9,000
	CALCULATION OF BOOK VALUE OF ASSET AS ON MARCH 23, 2016
	Purchase Value of Equipment	$                      96,000
	Less:
	Depreciation from 2011 to 2015 (5 years X $ 9,000)	$                      45,000
	Depreciation for 5 months in year 2016 ($ 9,000 X 5 / 12 month)	$                        3,750
	Book Value of the Assets	$                      47,250
	CALCULATION OF GAIN OR LOSS ON SALES OF EQUIPMENT
	Sales Value =	$                      46,000
	Less: Book Value	$                      47,250
	lOSS on sales pf Equipment	$                      -1,250
Journal Entries
Date	Account Title and explanation	Debit	Credit
June 01, 2016	Depreciation expesnes	$                        3,750
	Accumulated Deprecaition - Equipment		$                       3,750
June 01, 2016	Cash	$                      46,000
	Accumulated Deprecaition - Equipment	$                      48,750
	Loss on sale of Equipment	$                        1,250
	Equipment		$                    96,000