On January 1, 2010, Comfort Realty, purchased a limo at an acquisition cost of $28,000. The...
- On January 1, 2010, Comfort Realty, purchased a limo at an
acquisition cost of $28,000. The vehicle has been depreciated by
the stright0line method using a 4-year service life and a $4,000
salvage value. The company’s fiscal year ends on December 31.
prepare the journal entry or entries to record the disposal of the
limousine assuming that it was:
- Retired and scrapped with no salvage value of January 1 2014
- Sold for $9,000 on July 1, 2013
Homework Answers
Requirement 1
| Date | General Journal | Debit | Credit |
| jan 1 2014 | Accumulated Depreciation-Equipment | $ 24,000.00 | |
| Loss on disposal of Equipment | $ 4000 | ||
| Vehicle | $ 28,000.00 | ||
| (Asset sold) |
| Straight line Method | ||
| A | Cost | $ 28,000.00 |
| B | Residual Value | $ 4,000.00 |
| C=A - B | Depreciable base | $ 24,000.00 |
| D | Life [in years left ] | 4 |
| E=C/D | Annual SLM depreciation | $ 6,000.00 |
| Depreciation schedule | ||||
| Year | Book Value | Depreciation expense | Ending Book Value | Accumulated Depreciation |
| 2010 | $ 28,000.00 | $ 6,000.00 | $ 22,000.00 | $ 6,000.00 |
| 2011 | $ 22,000.00 | $ 6,000.00 | $ 16,000.00 | $ 12,000.00 |
| 2012 | $ 16,000.00 | $ 6,000.00 | $ 10,000.00 | $ 18,000.00 |
| 2013 | $ 10,000.00 | $ 6,000.00 | $ 4,000.00 | $ 24,000.00 |
Requirement 2
| Date | General Journal | Debit | Credit |
| 01-Jul | Cash | $ 9,000.00 | |
| Accumulated Depreciation-Equipment | $ 21,000.00 | ||
| Gain on sale of Machine | $ 2,000.00 | ||
| Vehicle | $ 28,000.00 | ||
| (Asset sold) |
| Depreciation schedule | ||||
| Year | Book Value | Depreciation expense | Ending Book Value | Accumulated Depreciation |
| 2010 | $ 28,000.00 | $ 6,000.00 | $ 22,000.00 | $ 6,000.00 |
| 2011 | $ 22,000.00 | $ 6,000.00 | $ 16,000.00 | $ 12,000.00 |
| 2012 | $ 16,000.00 | $ 6,000.00 | $ 10,000.00 | $ 18,000.00 |
| 2013 | $ 10,000.00 | $ 3,000.00* | $ 7,000.00 | $ 21,000.00 |
*Depreciation for 6 months in 2013
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