Presented below are selected transactions for the Cardinal company for 2015 Reco
ID: 2517453 • Letter: P
Question
Presented below are selected transactions for the Cardinal company for 2015
Record the jounal entries related to these events
Jan 1 Retired piece of equipment that was purchased Jan 1, 2005. The equipment cost 75,000 on that date and had a useful life of 10 yrs with no salvage value
April 30 Sold equipment for 38,000 that was purchased on Jan 1, 2012. The equip cost 105,000 and had useful life of 5 years with no salvage value
Dec 31 Recorded depreciation on equipment that was purchased on January 1, 2013. The equipment cost 42,000. Cardinal originally estimated a 5 year useful life and a 2000 salvage value. On Jan 1, 2015 they adjusted these estimates to a 6 year useful life with no salvage value. Assume depreciation is recorded annually
Explanation / Answer
Answer
Working 1
Working Column
Purchase date
01-Jan-05
A
Cost
$75000
B
Residual Value
$0
C=A-B
Depreciable base
$75000
D
Life[in years]
10
E=C/D
Annual Depreciation
$7500
F=E x 10 years
Depreciation from 2005 to 2014 [10 years]
$75000
G=A-F
Book Value at the time of retirement
0
Working 2
Working Column
Purchase date
01-Jan-12
A
Cost
$105000
B
Residula Value
$0
C=A-B
Depreciable base
$105000
D
Life[in years]
5
E=C/D
Annual Depreciation
$21000
F=E x 3 years
Depreciation from 2012 to 2014 [3 years]
$63000
F=E x 4/12
Depreciation for 2015 till April [4 months]
$7000
G=A-F
Book Value at the time of sale
$35000
H
Sold for
$38000
I=H-G
Gain (Loss) on sale
$3000
Working 3
Working Column
Purchase date
01-Jan-13
A
Cost
$42000
B
Residula Value
$2000
C=A-B
Depreciable base
$40000
D
Life[in years]
5
E=C/D
Annual Depreciation
$8000
F=E x 2 years
Depreciation from 2013 to 2014 [2 years]
$24000
G=A-F
Book Value on 1 jan 2015 when life is re-estimated
$18000
H=6years -2years passed
Remaining useful life based on new 6 years life
4
I=G/H
Annual depreciation (new)
$4500
Date
General Journal
Debit
Credit
01-Jan-15
Accumulated Depreciation-Equipment
$ 75,000.00
Working 1
Equipment
$ 75,000.00
(equipment retired)
30-Apr-15
Cash
$ 38,000.00
Working 2
Accumulated Depreciation-Equipment
$ 70,000.00
Gain on Sale
$ 3,000.00
Equipment
$ 1,05,000.00
(equipment sold)
31-Dec-15
Depreciation expense - Equipment
$ 4,500.00
Working 3
Accumulated Depreciation-Equipment
$ 4,500.00
(depreciation recorded based on new useful life)
Working 1
Working Column
Purchase date
01-Jan-05
A
Cost
$75000
B
Residual Value
$0
C=A-B
Depreciable base
$75000
D
Life[in years]
10
E=C/D
Annual Depreciation
$7500
F=E x 10 years
Depreciation from 2005 to 2014 [10 years]
$75000
G=A-F
Book Value at the time of retirement
0
Working 2
Working Column
Purchase date
01-Jan-12
A
Cost
$105000
B
Residula Value
$0
C=A-B
Depreciable base
$105000
D
Life[in years]
5
E=C/D
Annual Depreciation
$21000
F=E x 3 years
Depreciation from 2012 to 2014 [3 years]
$63000
F=E x 4/12
Depreciation for 2015 till April [4 months]
$7000
G=A-F
Book Value at the time of sale
$35000
H
Sold for
$38000
I=H-G
Gain (Loss) on sale
$3000
Working 3
Working Column
Purchase date
01-Jan-13
A
Cost
$42000
B
Residula Value
$2000
C=A-B
Depreciable base
$40000
D
Life[in years]
5
E=C/D
Annual Depreciation
$8000
F=E x 2 years
Depreciation from 2013 to 2014 [2 years]
$24000
G=A-F
Book Value on 1 jan 2015 when life is re-estimated
$18000
H=6years -2years passed
Remaining useful life based on new 6 years life
4
I=G/H
Annual depreciation (new)
$4500
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