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 Explination	Debit	Credit
1/30
3/10
3/20
5/18
6/23

Answer 1

Required journal entries are as prepared below:

Date	Particulars	L.F	Amount ($)	Amount ($)
Jan-30	Accumulated dep-building		152,592
	Loss on disposal of building		33,864
	Building			179,520
	Cash			6,936
	(for building disposed)
Mar-10	Cash		3,536
	Accumulated dep-machinery		15,232
	Loss on sale of machinery		2,992
	Machinery			21,760
	(For machinery sold)
Mar-20	Machine		2,720
	Cash			2,720
	(for gear replaced on machine)
May-18	Machine		7,480
	Acc dep - Machine (4,760*10%*6)		2,856
	Loss on disposal of base		1,904
	Cash			7,480
	Machine			4,760
	(For base sold)
Jun-23	Repairs and Maintenenace Expense		9,384
	Cash			9,384
	(For building repainted)

Working Notes

Cost of building in 2000	179,520
Less: Acc dep	152,592
(179,520*5%)*17
Book Value of building	26,928
Note: No dep in 2017 as building disposed in 2017
Cost of machinery in 2010	21,760
Less: Acc dep	15,232
(21,760*10%)*7
Book Value of machinery	6,528
Note: No dep in 2017 as machinery disposed in 2017