Learning Objectives 2,3, 7PA-35A Journalizing partial-year depreciation and asse

Question

Learning Objectives 2,3, 7PA-35A Journalizing partial-year depreciation and asset disposals and Appendix A exchanges During 2018, Mora Corporation completed the following transactions: Jan. 1 Gain $8,000 Traded in old office equipment with book value of $55,000 (cost of $127,000 and accumulated depreciation of $72,000) for new equipment. Mora also paid $70,000 in cash. Fair value of new equipment is $133,000. Assume the exchange had commercial substance. Jan. 1 Sold equipment that cost $18,000 (accumulated depreciation of $8,000 through December 31 of the preceding year). Mora received $6,100 cash from the sale of the equipment. Depreciation is computed on a straight- line basis. The equipment has a five-year useful life and a residual value of $0 Apr. 1 Dec. 31 Recorded depreciation as follows: Office equipment is depreciated using the double-declining-balance method over four years with a $9,000 residual value.

Explanation / Answer

Journal Entries

Date

General Journal

Debit

Credit

1-Jan

Office Equipment

$ 133,000.00

Accumulated Depreciation-Office Equipment

$    72,000.00

              Cash

$    70,000.00

               Equipment

$ 127,000.00

               Profit on sale of Office Equipment

$      8,000.00

(Equipment exchanged for new one)

1-Apr

Depreciation expense-Equipment

$          900.00

               Accumulated Depreciation-Equipment

$          900.00

(Depreciation expense till 1st April for 3 months)

1-Apr

Cash

$      6,100.00

Accumulated Depreciation-Equipment

$      8,900.00

Loss on sale of Equipment

$      3,000.00

              Equipment

$    18,000.00

(Equipment sold and loss incurred on sale)

31-Dec

Depreciation expense-Office Equipment

$    66,500.00

               Accumulated Depreciation-Office Equipment

$    66,500.00

(Depreciation on new office equipment charged)

Notes

1

Equipment sold on April 1 will be charged with depreciation for 3 months first and then it will be sold.

2

Distinction has been made between office equipment and Equipment and similarly different accounts are made for both.

A

Cost

$           133,000.00

B

Residual Value

$                9,000.00

C=A - B

Depreciable base

$           124,000.00

D

Life [in years]

4

E=C/D

Annual SLM depreciation

$             31,000.00

F=E/C

SLM Rate

25.00%

G=F x 2

DDB Rate

50.00%

Year

Beginning Book Value

Depreciation rate

Depreciation expense

Ending Book Value

Accumulated Depreciation

1

$ 133,000.00

50.00%

$ 66,500.00

$                66,500.00

$ 66,500.00

Journal Entries

Date

General Journal

Debit

Credit

1-Jan

Office Equipment

$ 133,000.00

Accumulated Depreciation-Office Equipment

$    72,000.00

              Cash

$    70,000.00

               Equipment

$ 127,000.00

               Profit on sale of Office Equipment

$      8,000.00

(Equipment exchanged for new one)

1-Apr

Depreciation expense-Equipment

$          900.00

               Accumulated Depreciation-Equipment

$          900.00

(Depreciation expense till 1st April for 3 months)

1-Apr

Cash

$      6,100.00

Accumulated Depreciation-Equipment

$      8,900.00

Loss on sale of Equipment

$      3,000.00

              Equipment

$    18,000.00

(Equipment sold and loss incurred on sale)

31-Dec

Depreciation expense-Office Equipment

$    66,500.00

               Accumulated Depreciation-Office Equipment

$    66,500.00

(Depreciation on new office equipment charged)

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.