Here are selected 2012 transactions of Falk Corporation. Jan. 1 Retired a piece

Question

Here are selected 2012 transactions of Falk Corporation.

Jan. 1 Retired a piece of machinery that was purchased on January 1, 2002. The machine cost $62,000 and had a useful life of 10 years with no salvage value.
June 30 Sold a computer that was purchased on January 1, 2010. The computer cost $39,000 and had a useful life of 3 years with no salvage value. The computer was sold for $5,000 cash.
Dec. 31 Sold a delivery truck for $9,000 cash. The truck cost $25,000 when it was purchased on January 1, 2009, and was depreciated based on a 5-year useful life with a $3,000 salvage value.


Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Falk Corporation uses straight-line depreciation. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Explanation / Answer

Year 2012 Jan. 1 Retired a piece of machinery that was purchased on January 1, 2002. The machine cost $62,000 and had a useful life of 10 years with no salvage value. SO Mahineery has been used for 10 Yrs ie from Jan 1, 2002 to Dec 31, 2011. So it is fully depreciated & salvage is zero. 1 Jan 2012 Accumuated Dep Dr $62,000 Machinery Acct Cr $62000 (Machiner is fully depreciated & is retired) June 30 Sold a computer that was purchased on January 1, 2010. The computer cost $39,000 and had a useful life of 3 years with no salvage value. The computer was sold for $5,000 cash. SO COmp is use for Year 2010, 2011 & for 6 month in 2012. So 2.5Yrs. So Dep using SLN = (Cost-Salvage)/Life = $39000/3 = $13000 pa So for 2.5 Yrs, Accum Dep = $13000*2.5 = $32,500 So Book Value on 30 Jun = COst - Accum Dep = 39000-32500 = 6500 It is sold for 5000. So Loss is 6500-5000 = 1500 30 Jun 2012 Cash Dr $5000 Accum Dep Dr $32500 Loss on Sale Dr $1500 Compu A/C Cr $39,000 Dec. 31 Sold a delivery truck for $9,000 cash. The truck cost $25,000 when it was purchased on January 1, 2009, and was depreciated based on a 5-year useful life with a $3,000 salvage value. Truck is used for 4 Yrs 2009 to 2012. So Dep using SLN = (Cost-Salvage)/Life = ($25000-3000)/5 = $4400 pa So for 4 Yrs, Accum Dep = $4400*4 = $17600 So Book Value on 31 Dec 2012 = COst - Accum Dep = 25000-17600 = 7400 It is sold for 9000. So Gain is 9000-7400 = 1600 31 Dec 2012 Cash Dr $9000 Accum Dep Dr $17600 Gain on Sale Cr $1600 Truck A/C Cr $25,000

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