E9-8. Record disposal of equipment. (LO 3), AP Here are selected 2017 transactio

Question

E9-8. Record disposal of equipment. (LO 3), AP Here are selected 2017 transactions of Akron Corporation. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2007. The machine cost $62,000 and had a useful life of 10 years with no salvage value. 30 Sold a computer that was purchased on January 1, 2015. The computer cost $36,000 and had a useful life of 3 years with no salvage value. The computer was sold for $5,000 cash. June Sold a delivery truck for $9,000 cash. The truck cost $25,000 when it was purchased on January 1, 2014, and was depreciated based on a 5-year useful life with a $4,000 salvage value. Dec. 31 Instructions Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Akron Corporation uses straight-line depreciation.

Explanation / Answer

CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD OF MACHIENARY Purchase Cost of MachinARY   $            62,000.00 Less: Salvage Value $                            -   Net Value for Depreciation $            62,000.00 Usefule life of the Assets 10 years Depreciation per year = Value for Depreciation / 10 years =                   6,200.00 Total Depreciation in 10 years = ($ 6,200 X 10)=                 62,000.00 Journal Entries Date Account Title and explanation Debit Credit Jan, 01 2017 Accumulated Depreciation $                  62,000         To Machienary $                     62,000 (To record the disposal of macienary) CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD OF COMPUTER Purchase Cost of Computer $            36,000.00 Less: Salvage Value $                            -   Net Value for Depreciation $            36,000.00 Usefule life of the Assets 3 years Depreciation per year = Value for Depreciation / 3 years =                 12,000.00 Total Depreciation in 2.5 years = ($ 12,000 X 2.5)=                 30,000.00 Book value = Prucashe value - Total Depreciation = $ 36,000 - $ 30,000 = $ 6000 Loss on sales = Book value - sAles value = $ 6000 - $ 5,000 = $ 1000 Journal Entries Date Account Title and explanation Debit Credit June 30, 2017 Cash $                     5,000 Accumulated Depreciation $                  30,000 Loss on Sales of Computer $                     1,000          To Computer $                     36,000 (To record the sale of Computer) CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD OF TRUCK Purchase Cost of TRUCK $            25,000.00 Less: Salvage Value $               4,000.00 Net Value for Depreciation $            21,000.00 Usefule life of the Assets 5 years Depreciation per year = Value for Depreciation / 5 years =                   4,200.00 Total Depreciation in 4 years = ($ 4,200 X 4)=                 16,800.00 Book value = Prucashe value - Total Depreciation = $ 25,000 - $ 16,800 =                   8,200.00 Gain on sales = Sales value - Book Value = $ 9000 - $ 8,200 = $ 800 Journal Entries Date Account Title and explanation Debit Credit June 30, 2017 Cash $                     9,000 Accumulated Depreciation $                  16,800          To Computer $                     25,000         To gain on sale of Truck $                           800 (To record the sale of Truck)

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