Assume that you are the accountant for Spurlock Corporation. The company purchas
ID: 2423625 • Letter: A
Question
Assume that you are the accountant for Spurlock Corporation. The company purchased a machine on January 1, 2009, for $40,000, estimating the useful life to be five years and the residual value to be $4,000. Spurlock uses the straight-line method of depreciation. Spurlock Corporation sold the machine on July 1, 2011, for $24,200. When the machine was purchased in 2009, it was recorded as an asset. The machine has been used to generate revenue. Therefore, a portion of the cost of the machine must be allocated to an expense each period. This is accomplished through the depreciation process and follows which accounting principle? The matching principle Depreciation expense for each full year is calculated by dividing the asset's depreciable cost by the useful life. The machine was sold on July 1, but had been used during the first half of 2011. Therefore, you must first record the depreciation up through July1 Check My Work Feedback First we need to review how we originally recorded the machine in the accounting records, how we reduced its value as it was used, and how we can bring the net value of the resource up to date. Hide Prepare the entry in the journal below.Explanation / Answer
The first part of the question correctly answered. So attaching the working of JV part.
Spurlock Corporation Details Amt $ Purchase cost of machine 40,000.00 Residual value 4,000.00 Depreciable amount 36,000.00 Useful life in years 5.00 Depreciation per year 7,200.00 Depreciation in 2009 7,200.00 Depreciation in 2010 7,200.00 Depreciation in 2011 upto Jul1 3,600.00 Accumulated Depreciation as on Jul 31 2011. 18,000.00 Carrying Value of Machine =40000-18000= 22,000.00 Sales value on Jul 1 2011. 24,200.00 Gain on disposal of machine 2,200.00 Journal Entry Date Account Title Dr $ Cr $ Jul 1.2011. Accumulated Depreciation 18,000.00 Fixed Asset (Machinery) 40,000.00 Cash 24,200.00 2,200.00 Gain On Disposal Of Fixed Asset