Question 7) Presented here are selected transactions for Hamid Company for 2018.

Question

Question 7) Presented here are selected transactions for Hamid Company for 2018. Retired a piece of machinery that was purchased on January 1, 2008. The machine cost $93,000 on that date and had a useful life of 10 years with no salvage value. Jan. 1 June 30 Sold a computer that was purchased on January 1, 2015. The computer cost $30,000 and had a useful life of 6 years with no salvage value. The computer was sold for $17,000. Nov. I Discarded a delivery truck that was purchased on January 1, 2015 The truck cost $34,200 and was depreciated based on an 8-year useful life with a $3,000 salvage value. Instructions: Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Hamid Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31,2017)

Explanation / Answer

Journal Entries Date Account Title and explanation Debit Credit Accumulated Depreciation - Machinary $                  93,000 Jan, 01 2018             To Machine $                     93,000 (To Record the disposal of machiene) Cash $                  17,000 June 30, 2018 Accumulated Depreciation $                  17,500         To Computer $                     30,000          To Gain in sale of Computer $                       4,500 (To Record the gain on sale of computer) Accumulated Depreciation $                  14,625 Nov, 01 2018 Loss on disposal of Truck $                  19,575       To Truck $                     34,200 (To Record the discard a truck) CALCULATION OF THE GAIN AND LOSSES ON SALE OF COMPUTER Cost of Computer $                  30,000 Less: Salvage Value $                            -   Depreciable Value (A) $                  30,000 Divide By "/" By   Life of the Computer 6 Years Depreciation per year $                     5,000 Depreciation for 3.5 Year (5,000 X 3.5 ) (B) $                  17,500 Book Value (A-B) $                  12,500 Sales Price $                  17,000 Gain =(Sales price - Book Value ) ($ 17000 - $ 12,500) $                     4,500 CALCULATION OF THE GAIN AND LOSSES ON SALE OF TRUCK Cost of Truck $                  34,200 Less: Salvage Value $                     3,000 Depreciable Value (A) $                  31,200 Divide By "/" By   Life of the Truck 8 Years Depreciation per year $                     3,900 Depreciation for 3 Year and 9 months (3,900 X3.75 ) (B) $                  14,625 Book Value (A-B) $                  19,575

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