Question
In: Accounting
On July 1, 2016, Alpha Company purchased for $72,000, equipment having a service life of eight...
On July 1, 2016, Alpha Company purchased for $72,000, equipment having a service life of eight years and an estimated residual value of $6,000. Alpha has recorded depreciation of the equipment using the double-declining balance method. On December 31, 2018, before making any annual adjusting entries, the equipment was exchanged for new machinery having a fair value of $32,500. The transaction has commercial substance. Use this information to prepare all General Journal entries (without explanation) required to record the events for December 31, 2018
Solutions
Expert Solution
Solution:
Depreciation rate on equipment at SLM = 1/8 = 12.5%
Depreciation rate on equipment using double declining method = 12.50*2 = 25%
Deprecation for 2016 = $72,000*25%*6/12 = $9,000
Carrying value of equipment at end of 2016 = $72,000 - $9000 = $63,000
Depreciation for 2017 = $63,000*25% = $15,750
Carrying value at the end of 2017 = $63,000 - $15,750 = $47,250
Depreciation for 2018 = $47,250 * 25% = $11,813
Carrying value at the end ofr 2018 = $47,250 - $11,813 = $35,437
Accumulated depreciation = $9,000 + $15,750 + $11,813 = $36,563
| Journal Entries - Alpha Company | |||
| Date | Particulars | Debit | Credit |
| 31-Dec-18 | Depreciation Expense Dr | $11,813.00 | |
| To Accumulated Depreciation - Equipment | $11,813.00 | ||
| 31-Dec-18 | Machinery A/c Dr | $32,500.00 | |
| Accumulated Depreciation - Equipment Dr | $36,563.00 | ||
| Loss on sale of equipment Dr | $2,937.00 | ||
| To Equipment | $72,000.00 | ||
ekkarill92 answered 9 months agoRelated Solutions
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