equipment acquired on scu were 314,300, and tees paid all old Bullding from the

Question

equipment acquired on scu were 314,300, and tees paid all old Bullding from the land were $15,800. Materials salvaged from the demolition of the building were sold for $6,800. A contractor was paid $890,000 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet and show your work. 0,00010,000 t l31254500 + 152.00-1, Equipment acquired on January 2, 2011 at a cost of $273,500 has an estimated useful life of eight years and an estimated residual value of $35,500. 2. Required:

Explanation / Answer

1.Calculation of Depreciation for the year 2011,2012,2013

Depreciation under SLM Method

                             = (Cost of the assets – Residual Value)/Usefull Life

                           = ($ 2,73,500 - $ 35,500 ) / 8 Years

                           = $ 2,38,000/ 8years

                           = $ 29,750/year

Depreciation for 2011 = $ 29,750

Depreciation for 2012 = $ 29,750

Depreciation for 2013 = $ 29,750

2.Calculation of Book Value of Equipment on January 1,2014

Book Value = Cost of the asset – accumulated depreciation

                   = $ 2,73,500 – ($ 29,750 X 3)

                   = $ 2,73,500 - $ 89,250

                   = $ 1,84,250

3.Journal Entry on sale on equipment for $ 170500 on January 2,2014

Cash / Bank A/c                                Dr     $ 1,70,500

Loss on sale of Equipment A/c                   Dr     $ 13,750

          To Equipment A/c                            Cr                              $ 1,84,250

(Being the Equipment sold for $ 170500 having book value of $ 184250)

Profit and Loss A/c                                     Dr     $ 13,750

          To Loss on sale of Equipment A/c    Cr                         $ 13,750

(Being the transfer of Loss on sale of equipment to Profit and loss A/c)

4. Journal Entry on sale on equipment for $ 1,89,000 on January 2,2014

Cash / Bank A/c                                Dr     $ 1,89,000

          To Equipment A/c                            Cr                              $ 1,84,250

          To Profit on sale of Equipment Cr                            $ $ 4,750

(Being the Equipment sold for $ 189000 having book value of $ 184250)

Profit on sale of Equipment A/c                 Dr      $ 4,750

          To Profit and Loss A/c              Cr                       $ 4,750

(Being the transfer of Profit on sale of equipment to Profit and loss A/c)

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