90.2K

Verified Solution

Link Copied!

Question $10[20$ points$]$

ABC Inc. has two assets and depreciates them yearly using the straight$-$line method. The company's year$-$end is December $31.$ Enter the transaction letter as the description when entering the transactions in the journal. Dates must be entered in the format dd$/$mmm $($i$.$e$.,$ January $15$ would be $15/$Jan$).$ Please make sure your final answer$($s$)$ are accurate to $2$ decimal places.

Scenario $1$:

On January $1,2015,$ machinery that cost $$19,000$ was purchased. It had a useful life of $10$ years with a residual value of $$1,500.$ On June $30,2020,$ the machinery was sold for $$17,000.$ Record these entries:

a$.$ Current year's depreciation to the date of sale.

b$.$ The entry for the sale.

$\backslash$table$[[$General Journal,Page G$8],[$Date$,$Account$/$Explanation$,$PR$,$Debit,Credit$],[30/$Jun$,$Depreciation expense, machinery,,$875,],[+$ t$,$Accumulated depreciation, machinery,,,$875],[,$a$,,,],[30/$Jun$,$Cash,,$17,000,],[+--,$Accumulated depreciation, machinery.,,,$],[,$Machinery,,,$19,000],[,$Gain on sale of machinery.,,,$],[,$b$,,,]]$

Scenario $2$:

A warehouse that cost $$170,000$ with a residual value of $$10,000$ is being depreciated over $20$ years. Or January $1,2020,$ an additional wing was constructed for $$70,000.$ At the time of the construction, the warehouse was $10$ years old. The estimated life of the wing, considered separately from the original warehouse, is $10$ years, and $$5,000$ is its estimated residual value.

Record these entries:

a$.$ The addition to the warehouse $($cash was paid$).$

b$.$ One year's depreciation on the warehouse's addition on December $31,2020.$

c$.$ Depreciation on the original warehouse on December $31,2020.$

d$.$ Assume that the warehouse and addition were sold on December $31,2021,$ $$143,000$ cash. Record the entry for sale if$,$ at the time of sale, the fair value of the original warehouse is $$67,000,$ and the fair value of the addition is $$76,000.$ Assume that the adjusting entries for $2021$ have already been completed. Show the amount for gain$/$loss for the warehouse and addition as separate accounts.

Answer & Explanation Solved by verified expert

See Answer