Question

Exercise 10-22

The following transactions occurred during 2017. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year.

Jan. 30		A building that cost $179,520 in 2000 is torn down to make room for a new building. The wrecking contractor was paid $6,936 and was permitted to keep all materials salvaged.
Mar. 10		Machinery that was purchased in 2010 for $21,760 is sold for $3,944 cash, f.o.b. purchaser’s plant. Freight of $408 is paid on the sale of this machinery.
Mar. 20		A gear breaks on a machine that cost $12,240 in 2009. The gear is replaced at a cost of $2,720. The replacement does not extend the useful life of the machine but does make the machine more efficient.
May 18		A special base installed for a machine in 2011 when the machine was purchased has to be replaced at a cost of $7,480 because of defective workmanship on the original base. The cost of the machinery was $19,312 in 2011. The cost of the base was $4,760, and this amount was charged to the Machinery account in 2011.
June 23		One of the buildings is repainted at a cost of $9,384. It had not been painted since it was constructed in 2013.

Prepare general journal entries for the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
1/30
3/10
3/20
5/18
6/23

Accounts Payable
Accumulated Depreciation-Building
Accumulated Depreciation-Equipment
Accumulated Depreciation-Machinery
Accumulated Depreciation-Trucks
Buildings
Cash
Common Stock
Contribution Revenue
Cost of Goods Sold
Depreciation Expense
Direct Labor
Discount on Notes Payable
Equipment
Factory Overhead
Gain on Disposal of Buildings
Gain on Disposal of Equipment
Gain on Disposal of Machinery
Gain on Disposal of Trucks
Insurance Expense
Interest Expense
Inventory
Land
Land Improvements
Loss on Disposal of Buildings
Loss on Disposal of Equipment
Loss on Disposal of Machinery
Loss on Disposal of Trucks
Machinery
Maintenance and Repairs Expense
Materials
No Entry
Notes Payable
Organization Expense
Paid-in Capital in Excess of Par - Common Stock
Prepaid Insurance
Retained Earnings
Salaries and Wages Expense
Sales Revenue
Trading Securities
Trucks

Answer 1

SOLUTION

Date	Account titles and Explanation	Debit ($)	Credit ($)
1/30	Accumulated Depreciation - Buildings*	152,592
	Loss on Disposal of Plant Assets**	33,864
	Buildings		179,520
	Cash		6,936
3/10	Cash ($3,944 - $408)	3,536
	Accumulated Depreciation -Machinery*	15,232
	Loss on Disposal of Plant Assets**	2,992
	Machinery		21,760
3/20	Machinery	2,720
	Cash		2,720
5/18	Machinery	7,480
	Accumulated Depreciation - Machinery*	2,856
	Loss on Disposal of Plant Assets**	1,904
	Machinery		4,760
	Cash		7,480
6/23	Building Maintenance and Repairs Expense	9,384
	Cash		9,384

1/30-

*Accumulated Depreciation - Buildings

Depreciation for one year - $179,520 * 5% = $8,976

Accumulated Depreciation = $8,976 * 17 years = $152,592

** Loss on Disposal of Plant Assets

= ($179,520 - $152,592) + 6,936 = $33,864

3/10-

*Accumulated Depreciation - Machinery

Depreciation for one year - $21,760 * 10% = $2,176

Accumulated Depreciation = $2,176 * 7 years = $15,232

** Loss on Disposal of Plant Assets

= ($21,760 - $15,232) + $408 - $3,944 = 2,992

5/18-

*Accumulated Depreciation - Machinery

Depreciation for one year - $4,760* 10% = $476

Accumulated Depreciation = $476 * 6 years = $2,856

** Loss on Disposal of Plant Assets

= ($4,760 - $2,856) = 1,904