On July 1, 2016, Alpha Company purchased for $72,000, equipment having a service

Question

On July 1, 2016, Alpha Company purchased for $72,000, equipment having a service life of eight years and an estimated residual value of $6,000. Alpha has recorded depreciation of the equipment using the double-declining balance method. On December 31, 2018, before making any annual adjusting entries, the equipment was exchanged for new machinery having a fair value of $32,500. The transaction has commercial substance. Use this information to prepare all General Journal entries (without explanation) required to record the events for December 31, 2018.

Explanation / Answer

(1) 01/07/2016 Equipment a/c dr 72000

To cash or bank a/c 72000

(2) 31/03/2017 depreciation a/c dr 13500

To equipment a/c 13500

(3) 31/03/2018 depreciation a/c dr 14625

To equipement a/c 14625

(4) 31/12/2018 new equipement a/c dr 32500

Profit and loss a/c dr 5375

equipment residual value a/c 6000

To old equipement adjustment a/c 43875   

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