Question
In: Accounting
Swann Company sold a delivery truck on April 1, 2019. Swann had acquired the truck on...
Swann Company sold a delivery truck on April 1, 2019. Swann had acquired the truck on January 1, 2015, for $39,500. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $4,000. Swann uses the straight-line method of depreciation. At December 31, 2018, the truck had a book value of $11,100.
Required:
| 1. | Prepare any necessary journal entries to record the sale of the
truck, assuming it sold for:
|
||||
| 2. | How should the gain or loss on disposal be reported on the income statement? | ||||
| 3. | Assume that Swann uses IFRS and sold the truck for $11,025. In addition, Swann had previously recorded a revaluation surplus related to this machine of $5,000. What journal entries are required to record the sale? |
Solutions
Expert Solution
| Date | account and explanation | Debit | Credit |
| Apr-01 | Depreciation Expense | $ 1,775.00 | |
|
|
Accumulated depreciation-equipment | $ 1,775.00 |
| Book value as on 31 December 2018 | 11100 |
| Less: Depreciatiob for 3 months | 1775 |
| (39500-4000)/5*3/12 | |
| Book value as on 31 March 2019 | 9325 |
| Accumulated Depreciation | 30175 |
| (39500-9325) |
1. a.
| Date | account and explanation | Debit | Credit |
| Apr-01 | Cash | $11,025.00 | |
| Accumulated depreciation-equipment (28400+1775) | $30,175.00 | ||
| Gain on sale of equipment | $ 1,700.00 | ||
| Equipment | $ 39,500.00 | ||
| (To record sale of equipment) |
1-b.
| Date | account and explanation | Debit | Credit |
| Apr-01 | Cash | $ 7,525.00 | |
| Accumulated depreciation-equipment (28400+1775) | $30,175.00 | ||
| Loss on sale of equipment | $ 1,800.00 | ||
| Equipment | $ 39,500.00 | ||
| (To record sale of equipment) |
2.
| 2a) Reporting | |
| Other revenue | |
| Gain on sale of equipment | $ 1,700.00 |
| 2b) Reporting | |
| Other Expense | |
| Loss on sale of equipment | $ 1,800.00 |
3. As per IFRS when revalued asset is disposed of revaluation surplus is transferred to retained earnings.
| Date | account and explanation | Debit | Credit |
| Revaluation Surplus | $ 5,000.00 | ||
| Retained Earnings | $ 5,000.00 |
Entry to record sale :
| Date | account and explanation | Debit | Credit |
| Apr-01 | Cash | $11,025.00 | |
| Accumulated depreciation-equipment (28400+1775) | $30,175.00 | ||
| Gain on sale of equipment | $ 1,700.00 | ||
| Equipment | $ 39,500.00 | ||
| (To record sale of equipment) |
If you have any query please ask in comment section.
ekkarill92 answered 3 years agoRelated Solutions
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Swann Company sold a delivery truck on April 1, 2019. Swann had
acquired the truck on January 1, 2015, for $39,500. At acquisition,
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Required:
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