Question

6. Ocean Fishers Ltd had a 22-foot fishing boat with an inboard motor that was purchased on April 9, 2009, for $84,000. The PPE Sub ledger shows the following information regarding the boat:

Fishing Boat – 22 Foot With Inboard Motor:

Component Date of Purchase Deprec.Method Cost Est.Residual Est.Life

Fibreglass body Apr. 9/09 SL $24,000 $ 3,000 15 yr

Motor Apr. 9/09    SL    60,000 -0- 10 yr

total $ 84000

On June 27, 2017, $66,000 cash was paid for a new motor to replace the old one, which was scrapped. The new motor had an estimated useful life of 12 years and a residual value of $3,000. Early in 2017, it was determined that the useful life of the boat's fibreglass body should be adjusted to a total of 20 years with no change in the residual value.

Required:

1. Record the appropriate entries regarding the

a) Purchase of the replacement motor on June 27, 2017. (If no entry is required for a transaction, select "No journal entry required" in the first account field.)

1. June 27 2017 Record depreciation in 2017 regarding motor being replaced.
2. Record replacement of motor.

b. Depreciation taken on the fishing boat (body plus motor) on December 31, 2017, the company’s year-end. (If no entry is required for a transaction, select "No journal entry required" in the first account field. Round the final answers to the nearest whole dollar.)

1.Dec 31, 2017, Record revised depreciation for 2017 on the boat (boat body plus motor.)

2. Calculate total depreciation taken on the fishing boat (body plus motor) for the company’s year ended December 31, 2017. (Round the final answers to the nearest whole dollar.) total 2017 depreciation

Answer 1

Component	Fibreglass	Old Motor	New Motor
Purchase date	09-Apr-09	09-04-2009	27-Jun-17
Cost	24000	60000	66000
Estimated Residual	3000		3000
Estimated life	15	10	12

Depreciation=(Cost - Salvage value) / Estimated life

Annual Depreciation

Fibre glass (24000 - 3000)/15	1400
Old motor (60000/10)	6000
New motor (66000 - 3000)/12	5250

Particulars	Fibre glass	Old motor	Period
2009	(1400) x 9/12 =1050	(6000) x 9/12 = 4500	for 9 months from 9 April 2009
2010 - 2016	(1400 x 7) = 9800	(6000 x 7) = 42000	for 7 years
2017 till 27 june 2017		(6000) x 6/12 = 3000	for 6 months till 27 June 2017

Particulars	Fibre glass	Old motor
Accumulated Depreciation	(1050+9800) = 10850	(4500+42000+3000) = 49500
Net Fixed Asset	(24000 - 10850) = 13150	(60000 - 49500) = 10500
Scrapped
Loss on scrapped motor		10500

Est. life - revised	20
Est. remaining life -Old	7.25	=15 years -7.75 Years
Est. remaining life - revised	12.25	=7.25 years -5 Years

Depreciation revised =(Net Fixed Asset - Salvage value) Est.revised life

(13150 - 3000)/12.25

=828.57

Depreciation	Fibre glass	New motor
2017	828.57	5250 x 6/12 = 2625
Accumulated depreciation	11678.57	2625

Journal entries
Date	Account	Debit($)	Credit($)
27-Jun-17	Depreciation expense - Old Motor	3,000
	Accumulated Depreciation		3,000
	( To record depreciation in 2017 regarding motor being replaced)
27-Jun-17	New Motor	66,000
	Accumulated Depreciation	49500
	Loss on scrapped asset	10500
	Old Motor		60,000
	Cash		66,000
	( To record purchase of the replacement motor and old motor scrapped)
31-Dec-17	Depreciation expense - Boat body	829
	Depreciation expense - New Motor	2,625
	Accumulated Depreciation		3,454
	( To record revised depreciation expense on fishing boat)
31-Dec-17	Depreciation expense - Boat body	829
	Depreciation expense - New Motor	2,625
	Depreciation expense - Old Motor	3,000
	Accumulated Depreciation		6454
	(To record total depreciation on thefishing boat)

Please rate, Thanks.