Question

3 Cengage Digital Learning x UW System Authenticati x + learn.wileyplus.com Send to Gradebook Next > Question 4 View Policies Current Attempt in Progress Carla Vista Co. had the following assets on January 1, 2022 Useful Lite (in years) Item Machinery Forklift Salvage Value $0 Cost $78.000 37.000 43.400 Purchase Date Jan 1, 2012 Jan 1, 2019 Jan 1, 2017 5 Truck 3.000 During 2022 each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $12,700. The truck was discarded on December 31 Journaliell entries required on the above dates, including entries to update depreciation, where applicable, on disposed assets. The company uses straight-line depreciation. All depreciation was up to date as of December 31, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Account Tickes and Explanation Credit Jan 1 Accumulated Depreciation Equipment G F G H I J K L : .

Answer 1

Solution :

1. Forklift :

Amount of forklift : 37000 dt : 01.01.19

Used upto 30th June 2022 i.e 3 & half years.

Depreciation for each year : 37000/5 = 7400 per year

For period from 01.01.22 to 30.06.22 : 7400/2= 3700

Entries :

To record depreciation exp on forklift :

30.06.2022. Depreciation-Forklift .. Dr. 3700

To Accumulated Dep-Forklift. 3700

Balance in accumulated depreciation account as on 30.06.2022:

7400 * 3.5 years = 25900

Balance in Asset - Forklift Account = 37000

Forklift sold for 12700 on 30.06.2022

Therefore, there was a profit on sale : as, (Asset amount- accumulated depreciation till date of sale) < Sale value

i.e (37000-25900) < 12700. Therefore, profit on sale = 12700- 11100 = 1600

Working Entry to record sale of asset : on 30.06.2022 :

Cash A/c .. Dr. 12700

Accumulated Depreciation A/c ..Dr. 25900

To Asset - Forklift 37000

To Profit on sale of asset 1600

2. Truck :

Truck was purchased for 43400 on 01.01.2017 life 8 years having salvage value of 3000 :

Therefore, depreciation for each year = 43400-3000 / 8 = 5050 per year.

On 31.12.2022, truck discarded hence, depreciation entry for that year will be passed :

31.12.2022 Deprecation Exp -Truck .. Dr. 5050

To Accumulated Dep-Truck 5050

For disposal of Truck :

31.12.2022 Salvaged Materials ..Dr. 3000

Accumulated Dep -Truck .. Dr. 30300

(5050*6)=30300

Loss on sale of Truck ..Dr. 10100

To Asset - Truck. 43400

Note : It is assumed that scrap if any is removed later hence, salvage materials account debited. Salvage value is the amount of asset assured at the time of sale.

Or , entry can be directly recorded as

Accumulated Dep- Truck 30300 Dr

Loss on sale of Truck 13100 Dr

To Asset - Truck. 43400 Cr

( Realising a Total loss of 13100, if nothing is recoverable on discarding of Truck ).