Can someone help fill in these values in the chart with instructions on how? Sho

Question

Can someone help fill in these values in the chart with instructions on how?

Shown below are the T accounts relating to equipment that was purchased for cash by a company on the first day of the current year. The machine depreciated on a straight-line basis with a estimated useful life of ten years and a residual value of $360.

Part of the equipment was sold on the last day of the current year for cash proceeds while the remaining equipment that was not sold became impaired.

Reconstruct the journal entries to record the following and figure out the missing amounts:

(a)
Purchase of equipment on January 1. What was the cash paid?
(b)
Depreciation recorded on December 31. What was the depreciation expense?
(c)
Sale of part of the equipment on December 31. What was the gain on disposal?
(d)
Partial impairment loss on the remaining equipment on December 31. What was the impairment loss?

Cash Jan. 1 1,334 Equipment 3,310 Dec. 31 Jan. 1 Dec. 31 1,324 Accumulated Depreciation-Equipment Dec. 31 295 Dec. 31 118 Dec. 31 60 Depreciation Expense Dec. 31 Gain on Disposal Dec. 31 Impairment Loss Dec. 31

Explanation / Answer

Answer a:

The equipment was purchased for cash on January 1. On purchase, the journal entry is:

Debit equipment account

To Cash

We observe a debit entry of $3,310 in T account of Equipment.

Hence cash paid was $3,310

Answer b:

Purchase cost of machinery = $3,310

Less, salvage value = $ 360

Depreciable base = $2,950

Useful life is 10 years.

Hence depreciation based on straight line method = $2,950 / 10 = $295.

The journal entry passed to record depreciation is:

Debit depreciation account

To Accumulated depreciation account.

We observe a credit entry of $295 on Dec 31 in T account of Accumulated Depreciation.

So, Depreciation expense was $295

Answer c:

Part of the equipment was sold on the last day of the current year for cash.

The journal entry recorded on disposal of equipment with a gain on disposal is:

Debit Cash

Debit Accumulated depreciation

To Equipment account

To Gain on disposal

On Dec 31,

we observe a debit entry in Cash account = $1,334

and a debit entry in accumulated depreciation = $118

We observe a credit entry in Equipment account = $1,324

Hence, gain on disposal:

Sales value = $1,334

Book value ($1,324 - $118) = $1,206

Gain on disposal = $128

Answer d:

The entry for impairment loss is:

Debit Impairment Loss

To Accumulated depreciation

We observe a a credit entry of $60 on Dec 31 in Accumulated depreciation.

Hence impairment loss = $60

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