Question

In: Accounting

Crane Company had the following assets on January 1, 2017. Item Cost Purchase Date Useful Life...

Crane Company had the following assets on January 1, 2017.

Item Cost Purchase Date Useful Life
(in years)
Salvage Value
Machinery $86,620 Jan. 1, 2007 10 $ 0
Forklift 36,600 Jan. 1, 2014 5 0
Truck 40,752 Jan. 1, 2012 8 3,664


During 2017, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $14,640. The truck was discarded on December 31. The company uses straight-line depreciation. All depreciation was up to date as of December 31, 2016.

Compute the gain or loss for each of the asset disposals that occurred in 2017. (Hint: Be sure to update depreciation for each asset from January 1, 2017, to disposal date.)

Item Gain or Loss Amount
Machinery
$
Forklift
$
Truck
$

Solutions

Expert Solution

Item

Gain or Loss Amount

Machinery

$0

Forklift

$3660 Gain

Truck

$12936 Loss

Explanations :-

Machinery :

Purchased as on Jan 1, 2007

Useful Life = 10 years

Sale value = $0

Passage of years on January 1 (Date when machinery was retired) = 10 years

There is no loss and no gain

Forklift :

Purchased as on Jan 1, 2014

Useful Life = 5 years

Sale value = $14640

Sale date = June 30 2017

Depreciation for 6 months (Jan 1 2017 to June 30 2017) = $36600/5 years * 6/12 = $3660

Accumulated Depreciation balance on the date of sale = $36600/5 years * 3.5 years = $25620

Book value on the date of sale = $36600 - $25620 = $10980

Gain or Loss = $14640 - $10980 = $3660 Gain

Truck :

Purchased as on Jan 1, 2012

Useful Life = 8 years

Salvage = $3664

Sale value = $0

Sale date = Dec 31 2017

Depreciation for 1 year (Jan 1 2017 to Dec 31 2017) = ($40752 - $3664)/8 = $4636

Accumulated Depreciation balance on the date of sale = ($40752 - $3664)/8 * 6 years = $27816

Book value on the date of sale = $40752 - $27816 = $12936

Gain or Loss = $0 - $12936 = $12936 Loss


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