Problem 9-16A Partial year\'s depreciation; exchanging PPE LO2, 3, 6 In 2017, St

Question

Problem 9-16A Partial year's depreciation; exchanging PPE LO2, 3, 6 In 2017, Staged Home Ltd. completed the following transactions involving delivery trucks: July 5 Traded-in an old truck and paid $15,100 in cash for furniture. The accounting records on July 5 showed the cost of the old truck at $52,500 and related accumulated depreciation of $8,750. The furniture was estimated to have a six-year life and a $10,668 trade-in value. The invoice for the exchange showed these items: Price of the furniture (equal to its fair value) Trade-in allowance 56,100 (41,000) Total paid in cash 15,100 Dec. 31 Recorded straight-line depreciation on the furniture (to nearest whole month). Required Prepare journal entries to record the transactions. (If no entry is required for a transaction, select "No journal entry require account field.)

Explanation / Answer

Depn P.a. = (Value of furniture - trade in value)/ Expected useful life

= (56100 - 10668)/6

= 7572 p.a.

Note: It has been assumed that depreciation is allowed fully in the year of acquisition, and that there is no depreciation in the year of disposal.

Date Particulars Debit Credit July 5 Furniture Dr. 56100 Accumulated Depn Dr. 8750 Loss on Disposal Dr. 2750 To Truck A/C 52500 To Cash A/C 15100 (Being trade in of truck for furniture)

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