Pearl Corporation owns machinery that cost $24,400 when purchased on July 1, 201
ID: 2577197 • Letter: P
Question
Pearl Corporation owns machinery that cost $24,400 when purchased on July 1, 2014. Depreciation has been recorded at a rate of $2,928 per year, resulting in a balance in accumulated depreciation of $10,248 at December 31, 2017. The machinery is sold on September 1, 2018, for $6,344.
Prepare journal entries to (a) update depreciation for 2018 and (b) record the sale. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
No.
Account Titles and Explanation
Debit
Credit
(a)
(b)
No.
Account Titles and Explanation
Debit
Credit
(a)
(b)
Explanation / Answer
Accumulated depreciation balance as on December 31, 2017
= $ 10,248
Depreciation for 2018
Yearly depreciation for 12 months
= $2,928
So, Depreciation from Jan’18 to Aug’18 that is 8 months
= Yearly depreciation x Months of depreciation / 12
= $2,928 x 8 / 12
= $ 1,952
So, Accumulated depreciation till Sep 1 ‘ 2018
= Accumulated depreciation till Dec’ 17 + Depreciation till date of sale of 2018
= $10,248 + $1,952
= $12,200
Book value on date of sale
= Cost – Accumulated depreciation till date of sale
= $24,400 - $12,200
= $12,200
So, loss on sale
= Book value – Sale price
= $12,200 - $6,344
= $5,856
a)
Entry to update depreciation for 2018
Depreciation $1,952
Accumulated Depreciation $1,952
b)
Recording of Sale
Accumulated Depreciation $12,200
Cash $6,344
Loss on sale of machinery $5,856
Machinery $24,400
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