Question

Jan 1 Retired a piece of machinery that was purchased on Jan 1 2010. The machine cost $62400 on that date.It had a useful life of 10 years with no salvage.

June 30 Sold a computer that was purchased on January 1,2017. The computer cost $35,500. It had a useful life of 5 years with no salvage value. The computer was sold for $14,100.

Dec 31 Discarded a delivery truck that was purchased on Jan 1 2016. The truck cost $36,660. It was depreciated based on a 6 year useful life with a $3000 salvage value.

Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Flounder Company uses straight line depreciation

Answer 1

Since the year in which these journal entries are to be posted is not specified (Just the dates are there), I have assumed them as to be posted in the year 2020.

Answer to 1st question:

Since the Machine costed $62,400 with no salvage value and is to be depreciated across an useful life of 10 years, the depreciation charged each year is $6,240 {(62,400-0)/10} So by 2019 already this asset is fully depreciated as 10 years completed in 2019. The balance in the respective ledgers as on 1st Jan 2020 would be as follows:

Machinery A/c= $62,400 Debit balance & Accumulated Depreciation on Machinery= $62,400 Credit balance.

On retiring this machinery on 1st Jan the following entries would be posted:

Accumulated Depreciation on Machinery A/c Dr.	$62,400
Machinery A/c Cr.		$62,400

Answer to 2nd question:

Computer purchased on 1st Jan 2017 for $35,500 with useful life of 5 years & no salvage value would have a depreciation charged each year $7,100 {($35,500-0)/5} So till 2019 a total of $21,300 depreciation (3years *$7,100) is provided for. The balance in the respective ledger as on 1st Jan 2020 would be as follows:

Computer A/c=$35,500 debit balance & Accumulated Depreciation on Computer=$21,300 credit balance.

On 30th June 2020 the Computer is sold for $14,100. Thus we need to provide for depreciation till 30th June and then arrive at profit or loss on Sale of Asset.

1) Entry for depreciation from 1st Jan 2020 to 30th June 2020- {($7,100)*6months/12months}= $3,550

Depreciation A/c Dr.	$3,550
Accumulated Depreciation on Computer A/c Cr.		$3,550

2) Entry to record proceeds from sale of asset & profit or loss on sale is as below:

Cash A/c Dr.	$14,100
Sale of Asset A/c Cr.		$14,100

Accumulated Depreciation A/c Dr. ($21,300+$3,550)	$24,850
Sale of Asset A/c Dr.	$14,100
Computer A/c Cr.		$35,500
Profit on Sale of Asset A/c Cr.		$3,450

Answer to 3rd question:

A delivery truck purchased on 1st Jan 2016 for $36,660 with a useful life of 6 years and a salvage value of $3,000 would have a depreciation charged each year $5,610 {($36,660-$3,000)/6} So till 2019 a total of $22,440 ($5,610*4years) is provided for as depreciation. The balance in respective ledger as on 1st Jan 2020 would be as follows:

Delivery Truck A/c= $36,660 debit balance & Accumulated Depreciation on Truck= $22,440 credit balance

On 31st Dec the delivery Truck was discarded. Thus the following entries would be posted:

1) Entry for providing depreciation for the year 2020:

Depreciation A/c Dr.	$5,610
Accumulated depreciation on DeliveryTruck A/c Cr.		$5,610

2) Entry for discarding the asset:

Salvaged Materials A/c Dr.	$3,000
Accumulated depreciation on Delivery Truck A/c Dr. ($22,440+$5,610)	$28,050
Loss from disposal of Asset A/c Dr.	$5,610
Truck A/c Cr.		$36,660