Exercise 9-8 Here are selected 2017 transactions of Indigo Corporation. Journali

Question

Exercise 9-8

Here are selected 2017 transactions of Indigo Corporation.

Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Indigo Corporation uses straight-line depreciation. (Record entries in the order displayed in the problem statement. 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.)

List of Account titles to use for this exercise!!

Accounts Payable
Accounts Receivable
Accumulated Depreciation-Buildings
Accumulated Depreciation-Equipment
Accumulated Depreciation-Plant Assets
Advertising Expense
Allowance for Doubtful Accounts
Amortization Expense
Bad Debt Expense
Buildings
Cash
Common Stock
Copyrights
Cost of Goods Sold
Depreciation Expense
Dividends
Equipment
Franchise
Freight-In
Gain on Disposal of Land
Gain on Disposal of Plant Assets
Goodwill
Income Tax Expense
Income Taxes Payable
Insurance Expense
Interest Expense
Interest Payable
Interest Receivable
Interest Revenue
Inventory
Land
Land Improvements
Loss on Disposal of Land
Loss on Disposal of Plant Assets
Maintenance and Repairs Expense
Mortgage Payable
No Entry
Notes Payable
Notes Receivable
Other Operating Expenses
Operating Expenses
Patents
Plant Assets
Prepaid Insurance
Property Tax Expense
Research and Development Expense
Revaluation Surplus
Retained Earnings
Salaries and Wages Expense
Salaries and Wages Payable
Sales Revenue
Service Revenue
Unearned Service Revenue
Website

Jan. 1 Retired a piece of machinery that was purchased on January 1, 2007. The machine cost $61,800 and had a useful life of 10 years with no salvage value. June 30 Sold a computer that was purchased on January 1, 2015. The computer cost $37,000 and had a useful life of 4 years with no salvage value. The computer was sold for $4,000 cash. Dec. 31 Sold a delivery truck for $9,380 cash. The truck cost $23,600 when it was purchased on January 1, 2014, and was depreciated based on a 5-year useful life with a $3,200 salvage value. ? C ii Seoure https eduqen.wieyplus.com.eduqen/ti/manuni I, Accounting, Gc h9 Part 2 H Herc arc cleted 2017 tranactions of indigo Ccrporation Jan. 1 Rcdrcd ? plccc of machinery that was purchasca on January 2007. The machnc cost $G1.300?nd had useful life of 10 years with no-wage value. Reyle?Score Obiectivue statement. 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 O for the amounts.) To recorc depredatan expen for 2017) To rec sale of cemputer To reud depreudlion expense for 201) To recone sle ot dehvery truck) O lype hene to search

Explanation / Answer

Indigo Corporation

Entries to record asset retirements –

Date

Account Titles and Explanation

Debit

Credit

1-Jan-17

Accumulated Depreciation - Equipment

$61,800

Equipment

$61,800

(To record machinery retired)

30-Jun-17

Depreciation Expense - Computer

$4,625

Accumulated Depreciation - Computer

$4,625

(To record depreciation expense for 6 months upto June 30, 2017)

30-Jun-17

Cash

$4,000

Accumulated Depreciation -Computer

$23,125

Loss on Disposal of Assets

$9,875

Computer

$37,000

(To record sale of computer and loss on asset disposal)

31-Dec-17

Depreciation Expense - Truck

$4,080

Accumulated Depreciation

$4,080

(To record depreciation expense for 2017)

31-Dec-17

Cash

$9,380

Accumulated depreciation

$16,320

Gain on sale of Asset

$2,100

Truck

$23,600

(To record sale of truck and gain on disposal of asset)

Computations –

Cost = $61,800

Useful life = 10 years

Salvage value =0

Annual Depreciation expense under Straight line method = 61,800/10 = $6,180

Date of retirement= Jan 1, 2017

The book value of asset at the time of retirement –

Book value = cost – accumulated depreciation

Asset held period = Jan 1, 2007 – Jan 1, 2017

Accumulated depreciation = 6,180 x 10 years = $61,800

Book value = 61,800 – 61,800 =0

Cost = $37,000

Useful life = 4years

Salvage value =0

Date of sale = June 30, 2017

Book value as on date of sale = cost – accumulated depreciation

Depreciation is on straight line basis,

Annual depreciation expense = 37,000/4 = $9,250

Accumulated depreciation = 2015 Depreciation +2016 Depreciation + 2017 (6 months) depreciation

= $9,250 + $9,250 + (9,250 x 6/12) = $23,125

Book value as on June 30, 2017 = $37,000 - $23,125 = $13,875

Sale proceeds = $4,000

Loss on sale = $13,875 - $4,000 = $9,875

Cost = $23,600

Useful life = 5 years

Salvage value = $3,200

Date of sale – Dec 31, 2017

Book value as on date of sale = cost – accumulated depreciation

Depreciation is on straight line basis,

Annual depreciation expense = (23,600 – 3,200) x 1/5 = $4,080

Accumulated depreciation = 2014 Depreciation + 2015 Depreciation +2016 Depreciation + 2017 depreciation

= $4,080 x 4 = $16,320

Book value= 23,600 – 16,320 = $7,280

Sale proceeds= $9,380

Gain on sale of truck = 9,380 – 7,280 = $2,100

Date

Account Titles and Explanation

Debit

Credit

1-Jan-17

Accumulated Depreciation - Equipment

$61,800

Equipment

$61,800

(To record machinery retired)

30-Jun-17

Depreciation Expense - Computer

$4,625

Accumulated Depreciation - Computer

$4,625

(To record depreciation expense for 6 months upto June 30, 2017)

30-Jun-17

Cash

$4,000

Accumulated Depreciation -Computer

$23,125

Loss on Disposal of Assets

$9,875

Computer

$37,000

(To record sale of computer and loss on asset disposal)

31-Dec-17

Depreciation Expense - Truck

$4,080

Accumulated Depreciation

$4,080

(To record depreciation expense for 2017)

31-Dec-17

Cash

$9,380

Accumulated depreciation

$16,320

Gain on sale of Asset

$2,100

Truck

$23,600

(To record sale of truck and gain on disposal of asset)

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