Question 3
Presented below are selected transactions at Ayayai Company for 2017.
Jan. 1 | Retired a piece of machinery that was purchased on January 1, 2007. The machine cost £59,570 on that date. It had a useful life of 10 years with no residual value. | |
June 30 | Sold a computer that was purchased on January 1, 2014. The computer cost £35,540. It had a useful life of 5 years with no residual value. The computer was sold for £13,650. | |
Dec. 31 | Discarded a delivery truck that was purchased on January 1, 2013. The truck cost £37,850. It was depreciated based on a 6-year useful life with a £3,710 residual value. |
Journalize all entries required on the above dates, including
entries to update depreciation, where applicable, on assets
disposed of. Ayayai Company uses straight-line depreciation.
(Assume depreciation is up to date as of December 31, 2016.)
(Credit account titles are automatically indented when
amount is entered. Do not indent manually.)
Date |
Account Titles and Explanation |
Debit |
Credit |
Jan. 1June 30Dec. 31 |
|||
Jan. 1June 30Dec. 31 |
|||
(To record depreciation) |
|||
June. 30 |
|||
(To record the sale of equipment) |
|||
Jan. 1June 30Dec. 31 |
|||
(To record depreciation) |
|||
Dec. 31 |
|||
(To record the discarding of equipment) |
(1) machinery purchased in 2007 with 10 years useful life will be fully depreciated by 2016 December.
there will be £59,570 in accumulated depreciation so we will reverse it.
Date |
Account Titles and Explanation |
Debit |
Credit |
Jan. 1 |
Accumulated depreciation-Equipment |
£59,570 |
|
Equipment |
£59,570 |
(2) we will find book value on June 30 after giving effect of depreciation. half year depreciation from January to June
Date |
Account Titles and Explanation |
Debit |
Credit |
Jan. 30 |
Depreciation expense |
£3,554 |
|
Accumulated Depreciation - computer |
£3,554 |
£35,540/5years * 1/2 year
Debit | Credit | ||
June. 30 |
cash |
£13,650 |
|
Accumulated depreciation-Equipment |
24,878 |
||
Gain on disposal of equipment |
2,988 |
||
Equipment |
£35,540 |
||
(To record the sale of equipment) |
depreciation accumulated from January 2014 upto June30 2017
£35,540 / 5years = 7,108 for 2014 + 7108 for 2015 + 7108 for 2016 + 3554 for 2017 = 24,878
Gain = purchase cost - depreciation - selling price
=35540-24878-13650
=2,988
(3) straight line depreciation = cost-residual value/useful life
=37850-3710/6
=5690
Debit | Credit | ||
Dec. 31 |
Depreciation expense |
£5,690 |
|
Acummulated depreciation |
£5,690 |
||
(To record depreciation) |
accumulated depreciation from January 2013 to Dec 31 2017
=5690 for 2013+5690 for 2014 +5690 for 2015+5690 for 2016+5690 for 2017
=28450
Debit | Credit | ||
Dec. 31 |
Loss on disposal of Truck/Asset |
£9,400 |
|
Accumulated depreciation |
£28,450 |
||
Equipment |
£37,850 |
||
(To record the discarding of equipment) |
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