Here are selected 2014 transactions of Howe Corporation. Jan. 1 Retired a piece
ID: 2748956 • Letter: H
Question
Here are selected 2014 transactions of Howe Corporation.
Jan. 1 Retired a piece of equipment that was purchased on January 1, 2004. The equipment cost $55,000 and had a useful life of 10 years with no salvage value.
June 30 Sold equipment that was purchased on January 1, 2012. The equipment cost $78,000 and had a useful life of 3 years with no salvage value. The equipment was sold for $9,000 cash.
Dec. 31 Sold equipment for $12,500 cash. The equipment cost $43,000 when it was purchased on January 1, 2011, and was depreciated based on a 5-year useful life with a $3,000 salvage value.
Required: Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Howe Corporation uses straight-line depreciation.
Explanation / Answer
Working
June 30 Sold equipment that was purchased on January 1, 2012. The equipment cost $78,000 and had a useful life of 3 years with no salvage value. The equipment was sold for $9,000 cash
Annual Depreciation = 78000/3
Annual Depreciation = 26000
Accumulated Depreciation till jan 2014 = 26000*2 = 52000
Depreciation till June 30 = 26000*1/2 = 13000
Accumulated Depreciation till june 2014 = 52000 +13000 = 65000
Dec. 31 Sold equipment for $12,500 cash. The equipment cost $43,000 when it was purchased on January 1, 2011, and was depreciated based on a 5-year useful life with a $3,000 salvage value
Annual Depreciation = (43000-3000)/5
Annual Depreciation = 8000
Accumulated Depreciation till jan 2014 = 8000*3 = 24000
Depreciation till dec 31 = 8000
Accumulated Depreciation tilldec 2014 = 24000 +8000 = 32000
Date Account Title Debit Credit Jan 1 Accumulated Depreciation 55000 Equipment 55000 June 30 Depreciation 13000 Accumulated Depreciation 13000 June 30 Cash 9000 Accumulated Depreciation 65000 Loss on sale of Equipment 4000 Equipment 78000 Dec. 31 Depreciation 8000 Accumulated Depreciation 8000 Dec. 31 Cash 12500 Accumulated Depreciation 32000 Gain on sale of Equipment 1500 Equipment 43000Related Questions
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