The following transactions occurred during 2014. Assume that depreciation of 10%

Question

The following transactions occurred during 2014. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year. Jan. 30 A building that cost $256,080 in 1997 is torn down to make room for a new building. The wrecking contractor was paid $9,894 and was permitted to keep all materials salvaged. Mar. 10 Machinery that was purchased in 2007 for $31,040 is sold for $5,626 cash, f.o.b. purchaser’s plant. Freight of $582 is paid on the sale of this machinery. Mar. 20 A gear breaks on a machine that cost $17,460 in 2009. The gear is replaced at a cost of $3,880. The replacement does not extend the useful life of the machine but does make the machine more efficient. May 18 A special base installed for a machine in 2008 when the machine was purchased has to be replaced at a cost of $10,670 because of defective workmanship on the original base. The cost of the machinery was $27,548 in 2008. The cost of the base was $6,790, and this amount was charged to the Machinery account in 2008. June 23 One of the buildings is repainted at a cost of $13,386. It had not been painted since it was constructed in 2010. Prepare general journal entries for the transactions.

Explanation / Answer

Working of Building Date Particulars Amount Amount Jan 1, 1997 Building Cost $256,030.00 Dec 31, 1997 Depriciation @5 % $12,801.50 Dec 31, 1998 Depriciation @5 % $12,801.50 Dec 31, 1999 Depriciation @5 % $12,801.50 Dec 31, 2000 Depriciation @5 % $12,801.50 Dec 31, 2001 Depriciation @5 % $12,801.50 Dec 31, 2002 Depriciation @5 % $12,801.50 Dec 31, 2003 Depriciation @5 % $12,801.50 Dec 31, 2004 Depriciation @5 % $12,801.50 Dec 31, 2005 Depriciation @5 % $12,801.50 Dec 31, 2006 Depriciation @5 % $12,801.50 Dec 31, 2007 Depriciation @5 % $12,801.50 Dec 31, 2008 Depriciation @5 % $12,801.50 Dec 31, 2009 Depriciation @5 % $12,801.50 Dec 31, 2010 Depriciation @5 % $12,801.50 Dec 31, 2011 Depriciation @5 % $12,801.50 Dec 31, 2012 Depriciation @5 % $12,801.50 Dec 31, 2013 Depriciation @5 % $12,801.50 Jan 30, 2014 $1,066.79 $218,692.29 Building Cost $256,030.00 Less Depreciation $218,692.29 $37,337.71 Less : Amount Received from Wrecking Contractor $9,894.00 $27,443.71 Journal Entrires Date Journal Debit Credit Jan 30, 2014 Depreciation A/c $1,066.79 Buildingg A/c $1,066.79 (Being Depreciation till Jan 30 2014) Wrecking Contractor A/c $9,894.00 Buildingg A/c $9,894.00 (Being Wrecking contract given to the contractor) Being amount received fr Loss on Building A/c $27,443.71 Building A/c $27,443.71 (Being Loos on Building domolishing is accounted) Workings of Machinery Date Particulars Amount Amount Jan 1, 2007 Machinery Cost $31,040.00 Dec 31, 2007 Depriciation @10 % $3,104.00 Dec 31, 2008 Depriciation @10 % $6,790.00 $3,858.44 Dec 31, 2009 Gear Replaced $3,880.00 $4,412.73 Dec 31, 2010 Depriciation @10 % $4,412.73 Dec 31, 2011 Depriciation @10 % $4,412.73 Dec 31, 2012 Depriciation @10 % $4,412.73 Dec 31, 2013 Depriciation @10 % $4,412.73 Mar 10, 2014 Depriciation @10 % $735.46 $41,710.00 $29,761.55 Building Cost $41,710.00 Less Depreciation $29,761.55 $11,948.45 Less : Machinery Sold $5,626.00 $6,322.45 Less: Freight Paid $582.00 $5,740.45 Journal Entrires Date Journal Debit Credit Mar 10, 2014 Depreciation A/c $735.46 Buildingg A/c $735.46 (Being Depreciation till Mar 10 2014) Bank A/c $5,626.00 Machinery A/c $5,626.00 (Being Machinery sold) Freight Paid $582.00 Bank A/c $582.00 Being Freight paid Los on Sale of machinery $5,740.45 Building A/c $5,740.45 (Being Loos on Sale of machinery)

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