Question

In: Accounting

1. On 5 September 2018, Norris Corporation purchased a computer equipment for $100,000, paid $20,000 cash...

1. On 5 September 2018, Norris Corporation purchased a computer equipment for $100,000, paid $20,000 cash and signed a 6% two-year notes payable for the remaining balance. The equipment was expected to be used for 4 years with a residual value of $10,000. Straight-line depreciation method is used. Depreciation for fractional years is recorded to the nearest full month. The financial year-end date is 31 December.

On 25 February 2020, the company spent $25,000 to completely overhaul the equipment. The management believes the estimated useful life of the equipment will be extended for 3 years more with residual value of $6,000, with effect on 25 February 2020.

Required:

Calculate the depreciation expense of the computer equipment for the year of 2020. Show your workings. (Round ALL answers to 2 decimal places.)

2. Marvel Company purchased motor vehicle costing $1,200,000 on 15 September 2017. The motor vehicle has an estimated useful life of 5 years and residual value of $200,000. Straight-line depreciation method is used. Half-year convention is adopted. On 5 March 2020, the company sold the motor vehicle for $400,000 cash. The company adjusts its accounts annually with the year-end at 31 December.

Required:

  1. (a) Prepare the journal entries to update the depreciation before disposal in 2020;

  2. (b) Prepare the journal entries on 5 March 2020 regarding to the disposal.

Solutions

Expert Solution

1
Depreciation for 2018 = $ (((100000-10000)/4)*4/12) = $ 7500
Depreciation for 2019 = $ (((100000-10000)/4)=$ 22500
Depreciation for 2020 = $ (((100000-10000)/4)*2/12=$ 3750
Depreciation for 2020 = $ (((100000+25000-6000-7500-22500-3750)/5)*10/12=$ 14208.33
Total Depreciation for 2020 = 3750 + 14208.33 = $ 17958.33
2
Depreciation for 2017 = $(((1200000 - 200000)/5))/2 = $ 100000
Depreciation for 2018 = $ ((1200000 - 200000)/5) = $ 200000
Depreciation for 2019 = $ ((1200000 - 200000)/5) = $ 200000
Depreciation for 2020 = $ ((1200000 - 200000)/5) *2/12= $ 33333.33
Date Particulars Debit Credit
05-Mar-20 Depreciation Expense            33,333.33
To Accumulated Depreciation                  33,333.33
( for 2020)
05-Mar-20 Accumulated Depreciation         5,33,333.33
Cash         4,00,000.00
Loss on Disposal ofEquipment         2,66,666.67
To Equipment account            12,00,000.00

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

On 1 January 2006, Norris Company purchased equipment for $42,000. Norris also paid $1,200 for shipping...
On 1 January 2006, Norris Company purchased equipment for $42,000. Norris also paid $1,200 for shipping and installation. The equipment is expected to have a useful life of 10 years and a salvage value of $3,200. (a) Calculate the depreciation expense for the years 2006 through 2008, using the straight-line method. (b) Calculate the depreciation expense for the years 2006 through 2008, using the double- declining balance method. (c) What is the book value of the equipment at the end...
1 Purchased computer terminals for RM20,000 from Digital Equipment on account. 2 Paid RM4,000 cash for...
1 Purchased computer terminals for RM20,000 from Digital Equipment on account. 2 Paid RM4,000 cash for September rental on storage space. 3 Received RM15,000 cash from customers for contracts billed in August. 4 Provided computer services to Fisher Construction Company for RM3,000 cash. 5 Paid TNB, a power company, RM11,000 cash for energy usage in August. 6 Shareholders invested an additional RM32,000 in the business. 7 Paid Digital Equipment for the terminal purchased in (1) above. 8 Incurred advertising expense...
On September 1, 2018, Able Company purchased a building from Regal Corporation by paying $580,000 cash...
On September 1, 2018, Able Company purchased a building from Regal Corporation by paying $580,000 cash and issuing a one-year note payable for the balance of the purchase price. Interest on the note is stated at an annual rate of 11% and is paid at maturity. In its December 31, 2018, balance sheet, Able correctly presented the note and interest payable as follows: Interest Payable: $ 19,800 Notes Payable, 11% due September 1, 2019 $540,000 1. How much must Able...
financial management principles. . Bill S.Preston purchased a new house for $100,000. He paid $20,000 upfront...
financial management principles. . Bill S.Preston purchased a new house for $100,000. He paid $20,000 upfront on the down payment and agreed to pay the rest over the 25 years in 25 equal annual payments that include principal payments plus 8 percent compound interest on the unpaid balance. What will these equal payments be? What is the present value of an annuity of $90 received at the beginning of each year for the next six years? The first payment will...
HMC sold equipment December 5, 2018 for $2,000. It originally purchased the equipment February 1, 2010...
HMC sold equipment December 5, 2018 for $2,000. It originally purchased the equipment February 1, 2010 for $12,000. The equipment is fully depreciated for book and tax purposes. For tax purposes, the entire gain is recaptured as ordinary income under Section 1245. Complete Tax forms 4562(Depreciation and Amortization) and 4797(Sale of business property) for the following transaction. Please include all supporting forms used in your calculation. The forms can be found on the IRS's website. I have no way of...
Problem 3 (13 pts.)      On November 1, 2019, Franco Corporation purchased equipment costing $20,000 by...
Problem 3 (13 pts.)      On November 1, 2019, Franco Corporation purchased equipment costing $20,000 by giving a 6%, 90-day note.      Prepare general journal entries to record: the acquisition of the equipment       b) the year end accrual of interest at December 31 the payment of the note on January 31. Problem 4 (7 pts.) During the first quarter of 2020, Pouncey Products sold 40,000 units of its best-selling product. Pouncey expects 2% of these units to be returned...
BRAND purchased equipment for $290,000 cash, sold equipment costing $150,000 with a book value of $100,000,...
BRAND purchased equipment for $290,000 cash, sold equipment costing $150,000 with a book value of $100,000, and declared and paid dividends during 2021. No new notes payable were issued during the year. Financial data follows.  All balances are normal.   Balance Sheet Dec. 31, 2021 Dec. 31, 2020 Change Cash $  36,000 $29,000 $  7,000 Accounts receivable   125,000 97,000 28,000 Inventory    100,000 114,000 (14,000) Equipment 740,000 600,000 140,000 Accum. depreciation 370,000 220,000 150,000 Accounts payable 170,000 150,000 20,000 Unearned revenue 74,000 44,000 30,000 Accrued...
BRAND purchased equipment for $290,000 cash, sold equipment costing $150,000 with a book value of $100,000,...
BRAND purchased equipment for $290,000 cash, sold equipment costing $150,000 with a book value of $100,000, and declared and paid dividends during 2021. No new notes payable were issued during the year. Financial data follows.  All balances are normal.   Balance Sheet Dec. 31, 2021 Dec. 31, 2020 Change Cash $  36,000 $29,000 $  7,000 Accounts receivable   125,000 97,000 28,000 Inventory    100,000 114,000 (14,000) Equipment 740,000 600,000 140,000 Accum. depreciation 370,000 220,000 150,000 Accounts payable 170,000 150,000 20,000 Unearned revenue 74,000 44,000 30,000 Accrued...
On January 1, 2018, Fulton Corporation purchased land as a factory site for $80,000. Fulton paid...
On January 1, 2018, Fulton Corporation purchased land as a factory site for $80,000. Fulton paid $30,000 and signed a noninterest-bearing note requiring the company to pay the remaining $50,000 on January 1, 2021. An interest rate of 5% properly reflects the time value of money for this type of loan agreement. An old building on the property was demolished, and construction began on a new building that was completed on December 31, 2018. Costs incurred during this period are...
The Darlington Equipment Company purchased a machine 5 years ago at a cost of $100,000. The...
The Darlington Equipment Company purchased a machine 5 years ago at a cost of $100,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $10,000 per year. If the machine is not replaced, it can be sold for $10,000 at the end of its useful life. A new machine can be purchased for $160,000, including installation costs. During its 5-year life, it will reduce cash...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT