During 2011, Northwestern Industries disposed of plant assets in the following t
ID: 2444712 • Letter: D
Question
During 2011, Northwestern Industries disposed of plant assets in the following transactions:
6-Jan Equipment costing $18,000 was given to a scrap dealer at no charge. At the date of disposal, accumulated depreciation on the equpment was $16,800.
3-Mar Northwestern Industries wold land and building for $800,000 and received the following: $100,000 cash and a 5 year, 12% note receivable for the remaining balance. Northwestern's records showed the following accounts and amounts: Land = $50,000; Buildings = $680,000; Accumulated Depreciation - Building $250,000 (at the date of disposal)
10-Jul Northwestern Industries purchased and new truck and traded in an old truck at the same time. The old truck was originally purchased at $26,000 and the accumulated depreciation at the time of trade was $22,000. The new truck listed for $37,000, but the company received a $12,000 trade-in allowance on the old truck and paid only $25,000 in cash for the new truck. Trucks are part of the Vehicle account for Northwestern Industries.
3-Sep Northwestern Industries upgraded their computer system. The old system had cost $12,000 and the accumulated depreciation was $9,000. The new computer costs $10,000. The company agreed to a trade-in on the old computer system of $400. Northwestern paid $1,000 down in cash and issued a 1 year 10% note payable for the balance of $8,600 owed.
REQUIRED: Prepare journal entries to record each of the disposal transactions. Assume that depreciation expense on each asset has been recorded up to the date of disposal. You do not need to update accumulated depreciation but use the amounts in each situation
Explanation / Answer
Solution:
(A). JAN - 6
Asset Value = 18,000
Less: Accumulated = 16,800
Value = 1,200
(B). March -3
Asset Value = 7,30,000
Less: Accumulated Depreciation = 2,50,000
Value = 4,80,000
(C). July -10
Asset Value = 26,000
Less: Accumulated Depreciation = 22,000
Value = 4,000
Take Old truck Trade allowance = 12,000
New Asset Value = 37,000
New Truck Paid Amount = 25,000
Remining Balance Total = 16,000
New Truck Due = 12,000
(D). Sep -3
Asset Value = 12,000
Less:Accumulated Depreciation = 9,000
Value = 3,000
Old Computer Trade = 400
New Computer Value = 10,000
Less: Down Payment = 1,000
Value = 9,000
Depreciation 10,000 * 10 / 1000 = 100
Value = 8,900
Due Amount = 8,600
Balance = 300
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