The property, plant, and equipment section of the Jasper Company’s December 31,
ID: 2431792 • Letter: T
Question
The property, plant, and equipment section of the Jasper Company’s December 31, 2017, balance sheet contained the following:
The land and building were purchased at the beginning of 2013. Straight-line depreciation is used and a residual value of $50,000 for the building is anticipated.
The equipment is comprised of the following three machines:
The straight-line method is used to determine depreciation on the equipment. On March 31, 2018, Machine 102 was sold for $49,000. Early in 2018, the useful life of machine 101 was revised to five years in total, and the residual value was revised to zero.
Required:
1. Calculate the accumulated depreciation on the equipment at December 31, 2017.
2. Prepare the journal entry to record 2018 depreciation on machine 102 up to the date of sale.
3. Prepare a schedule to calculate the gain or loss on the sale of machine 102.
4. Prepare the journal entry for the sale of machine 102.
5. Prepare the 2018 year-end journal entries to record depreciation on the building and equipment.
The land and building were purchased at the beginning of 2013. Straight-line depreciation is used and a residual value of $50,000 for the building is anticipated.
The equipment is comprised of the following three machines:
The straight-line method is used to determine depreciation on the equipment. On March 31, 2018, Machine 102 was sold for $49,000. Early in 2018, the useful life of machine 101 was revised to five years in total, and the residual value was revised to zero.
Required:
1. Calculate the accumulated depreciation on the equipment at December 31, 2017.
2. Prepare the journal entry to record 2018 depreciation on machine 102 up to the date of sale.
3. Prepare a schedule to calculate the gain or loss on the sale of machine 102.
4. Prepare the journal entry for the sale of machine 102.
5. Prepare the 2018 year-end journal entries to record depreciation on the building and equipment.
Explanation / Answer
Requirement 1
Machine 101:
$66,400 - 8,000
= $7,300 per year x 3 years = $ 21,900
8 years
Machine 102:
$79,000 - 9,000
= $10,000 per year x 1.5 years = 15,000
7 years
Machine 103:
$41,500 - 4,000
= $3,750 per year x 4/12 = 1,250
10 years
Accumulated depreciation, 12/31/17 $38,150
Requirement 2,3 & 4
To record depreciation on machine 102 through date of sale.
March 31, 2018
Depreciation expense ($10,000 per year x 3/12)................. 2,500
Accumulated depreciation - equipment................... 2,500
To record sale of equipment.
March 31, 2018
Cash.......................................................................... 49,000
Accumulated depreciation ($15,000 + 2,500).................. 17,500
Loss on sale of equipment (determined below)................ 12,500
Equipment............................................................. 79,000
Loss on sale of machine 102:
Proceeds $49,000
Less book value on 3/31/18:
Cost $79,000
Less accumulated depreciation:
Depreciation through 12/31/17 $15,000
Depreciation from 1/1/18 to
3/31/18 ($10,000 x 3/12) 2,500 17,500 61,500
Loss on sale $12,500
Requirement 5
Building:
Useful life of the building:
$250,000
= $50,000 in depreciation per year
5 years
(2013-2017)
$800,000 - 50,000
= 15-year useful life
$50,000
To record depreciation on the building.
Depreciation expense [($800,000 - 50,000) ÷ 15 years]....... 50,000
Accumulated depreciation - building...................... 50,000
To record depreciation on the equipment.
Depreciation expense (determined below)....................... 26,000
Accumulated depreciation - equipment................... 26,000
Equipment:
Machine 103 (determined above) $ 3,750
Machine 101:
Cost $66,400
Less: Accumulated depreciation 21,900
Book value, 12/31/17 44,500
Revised remaining life (5 years - 3 years) ÷ 2 years 22,250
$26,000
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