Question

The property, plant, and equipment section of the Jasper Company’s December 31, 2020, balance sheet contained the following:

Property, plant, and equipment:
Land				$	111,000
Building	$	496,000
Less: Accumulated depreciation		(155,000	)		341,000
Equipment		138,450
Less: Accumulated depreciation		?			?
Total property, plant, and equipment					?

The land and building were purchased at the beginning of 2016. Straight-line depreciation is used and a residual value of $31,000 for the building is anticipated.

The equipment is comprised of the following three machines:

Machine	Cost			Date Acquired		Residual Value				Life (in Years)
101	$	49,300		1/1/2018		$	6,100			8
102		63,800		6/30/2019			7,100			7
103		25,350		9/1/2020			2,100			10

The straight-line method is used to determine depreciation on the equipment. On March 31, 2021, Machine 102 was sold for $39,000. Early in 2021, the useful life of machine 101 was revised to five years in total, and the residual value was revised to zero.

Required:

1. Calculate the accumulated depreciation on the equipment at December 31, 2020.
2. Prepare the journal entry to record 2021 depreciation on machine 102 up to the date of sale.
3. Calculate the gain or loss on the sale of machine 102.
4. Prepare the journal entry for the sale of machine 102.
5. Prepare the 2021 year-end journal entries to record depreciation on the building and remaining equipment.

Answer 1

ANSWER:

1) Calculate the accumulated depreciation on the equipment at December 31, 2020

Straight line depreciation = ( Cost - Residual value ) / Life in years

a)Machine 101 :

  Straight line method depreciation = ( 49,300- 6,100 )/ 8

= $ 5,400

Total depreciation for 2018,2019 and 2020. = 5,400*3 (years)=16,200

b)Machine 102

  Straight line method depreciation = ( 63,800 - 7100 )/ 7

= 56,700 / 7

=$8,100

= 8200 *1/2 = 4,050

Total depreciation =8100 + 4050 = 12,150

c) Machine 103 :

Straight line method depreciation = ( 25350 - 2100 )/ 10

only for 4 months = [23250 / 10]*4/12

only for 4 months = $2325*4/12

only for 4 months = $ 775

Total depreciation =$775

Accumulated depreciation on December 31 in 2020 = Machine 101 + Machine 102 + Machine 103

= $ 16,200 + 12,150 + 775

=$ 29125

Accumulated depreciation on December 31 in 2020 = $ 29125

2) Prepare the journal entry to record 2021 depreciation on machine 102 up to the date of sale.

Date	Particulars	Debit	Credit
March 31, 2021	Depreciation Expense [8100*3/12]	2025
	Accumulates depreciation		2025

3) Prepare a schedule to calculate the gain or loss on the sale of machine 102.

sale proceeds		39000
Less:-Cost	63,800
Accumulated depreciation [12150+2025 ]	(14175)	(49625)
Loss on sale		(10625)

4) Prepare the journal entry for the sale of machine 102.

Date	Particulars	Debit	Credit
31-Mar-21	Cash	39000
	Accumulated depreciation	14175
	Loss on sale of	10625
	To Equipment		63800