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In: Accounting

On January 1 of the current year, Herkimer & Co. purchases, a group of 6 laptops...

On January 1 of the current year, Herkimer & Co. purchases, a group of 6 laptops for its new hires. The laptops are purchased for $2,200 each with a residual value of $400 each. Herkimer expects the laptops to be used for 3 years. At the end of the current year, Herkimer & Co. sells two laptops for $1,900 each.

Required:

Prepare the journal entries to record the purchase of the laptops, the depreciation on the laptops, and the sale of the laptops in Year 1.

Solutions

Expert Solution

purchase of 6 laptops

debit credit
laptop $13200
cash $13200

6 laptop costs=6*$2200=$13200

laptop is an asset account which should be debited when it increases and cash is also an asset account which should be credited when it decreases

depreciation expense

debit credit
depreciation expense $3600
accumulated depreciation $3600

depreciation expense for 1 laptop=(cost-residual value)/estimated life=($2200-$400)/3=$600 per year

depreciation expense for 6 laptop=$600*6=$3600

depreciation is an expense account which should be debited when it increases and accumulated depreciation is a contra account which always have a credit balance

the sale of the laptops in Year 1

debit credit
cash $3800
accumulated depreciation $1200
gain on sale of asset $600
laptop $4400

the cash recieved for 2 laptop sold=2*$1900=$3800

accumulated depreciation for 1 year for 1 laptop=$600

accumulated depreciation for 1 year for 2 laptop=$600*2=$1200

carrying value of 1 laptop=cost-accumulated depreciation=$2200-$600=$1600

carrying value of 2 laptop=$1600*2=$3200

gain on sale of 2 laptop=cash recieved for 2 laptop sold-carrying value of 2 laptop=$3800-$3200=$3600

the cost of 2 laptop=2*$42200=$4400

cash is an asset account which should be debited when it increases, accumulated depreciation is a contra account which always have a credit balance, gain on sale of laptop in an income account which should be credited when it increases and laptop is an asset account which should be credited when it decreases.

ekkarill92 answered 1 year ago
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