In: Accounting
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 |
$ |
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