Question

The following are some transactions of Sheridan Company for 2021. Sheridan Company uses straight-line depreciation and has a December 31 year end.

Apr. 1		Retired a piece of equipment that was purchased on January 1, 2012, for $48,000. The equipment had an expected useful life of 10 years with no residual value.
July 30		Sold equipment for $1,300 cash. The equipment was purchased on January 3, 2019, for $14,040 and was depreciated over an expected useful life of three years with no residual value.
Nov. 1		Traded in an old vehicle for a new vehicle, receiving a $10,000 trade-in allowance and paying $36,000 cash. The old vehicle had been purchased on November 1, 2015, at a cost of $35,600. The estimated useful life was eight years and the estimated residual value was $6,800. The fair value of the old vehicle was $8,900 on November 1, 2021.

For each of these disposals, prepare a journal entry to record depreciation from January 1, 2021, to the date of disposal, if required.

Record the disposals.

E9.8 (LO 3) AP On October 1, 2019, Chignecto Manufacturing Company purchased a piece of high-tech equipment for $90,000 cash. Chignecto estimated the equipment would have a six-year useful life and a residual value of $9,000. The company uses straight-line depreciation and has a September 30 fiscal year end.

Record asset addition and revised depreciation.

On October 1, 2021, Chignecto paid $15,000 cash to upgrade the equipment. It is expected that the upgrade will significantly reduce the operating costs of the equipment. Chignecto also reviewed the equipment's expected useful life and estimated that, due to changing technology, the equipment's total expected useful life will be four years and its residual value will be $5,000.

Instructions

1. Calculate the annual depreciation expense for the first two years of the equipment's life.
2. Calculate the carrying amount of the equipment at September 30, 2021.
3. Record the expenditure to upgrade the equipment on October 1, 2021.
4. Record the annual depreciation of the equipment on September 30, 2022.

Answer 1

9 Solution . – In this given quest need to record dep neciation and disposal for thes 3 different transactions. Straight line de pereciation means charge equal de perecia. -tion over the useful years of assets. Situation est. Date of purchase - 1st Jan 2012 cost $48000 useful Life - 10 years Residual value & vil Depreciation for each $48000 year -$4800 So, written down value as on 1st Jan 2021 $48000 - 9x 9800 = $4800 written down value as on April ist - $4800 - 1200 $3600 Loss - $3600 20

Eritry Ant in ? Date Apr.sst Dr particulars depreciation Loss on asset 410 A/C 1200 3.600 To Equipment AC 4800 Situation and Date of purchase - Jan 3/2019 Purchase cost = $14060. useful Life 3 years Residual value = vilt sales valve - $ 1300 written down value as on July 1st 2021 $ 14040 - 4680 - 4680 - 2340 . $ 2340 Loss on sales - $2340 - 1300$-$390 - $ 1040 - $390 Entry = $650 Ant in $ Date particulars Dr Cr Judy 30 Depreciation A/c 2730 Loss on sale AK 650 Cash sales A/c 1300 To Equipment 4680

Situation 3rd Trade-in- allowance = $1 purchase cost - $35600 Date of purchase - Now, !" useful Life - 8 years. Residual valve - $6800 Depreciation per year. le = $10,000 5600 or 1, 2015 -835600 - 6800 - 3600 Written down value as on Nor, 1st 2021 - $35600 - 1800 - 6X 3600 - $12200 Loss = $ 12200 - 1oooo - $2200 Entry Amt in $ Date particulars Dr ca Novest Depreciation A/C 3600 Loss on old A/C 2200 vechicle New vehicle A/C 46000 To, cash A/C To old vehicleflc 36000 15800