Crane Company had the following assets on January 1, 2017. During 2017, each of
ID: 2516825 • Letter: C
Question
Crane Company had the following assets on January 1, 2017.
During 2017, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $11,760. The truck was discarded on December 31.
Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on disposed assets. The company uses straight-line depreciation. All depreciation was up to date as of December 31, 2016. (Credit account titles are automatically indented when the 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.)
Date
Account Titles and Explanation
Debit
Credit
June 30
Dec. 31
Item Cost Purchase Date Useful Life(in years) Salvage Value Machinery $69,580 Jan. 1, 2007 10 $ 0 Forklift 29,400 Jan. 1, 2014 5 0 Truck 32,736 Jan. 1, 2012 8 2,944
Explanation / Answer
The machinery has the useful life of 10 years and purchased on January 1, 2007. It means that the whole cost of the machinery of $69,580 has been depareciated upto December 31, 2016.
Depreciation on Forklift for 6 months of 2017 = [(Cost - Salvage Value)/Useful Life]*6/12
= [($29,400-$0)/5 yrs]*6/12 = $2,940
Accumulated Depreciation upto June 30, 2017 = ($5,880*3 yrs)+$2,940 = $20,580
Depreciation on Truck per year = [(Cost - Salvage Value)/Useful Life]*6/12
= ($32,736-$2,944)/8 yrs = $3,724
Accumulated Depreciation upto Dec. 31, 2017 = $3,724*6 yrs = $22,344
Journal Entries (Amounts in $)
Date Account Titles and Explanations Debit Credit Jan 1 Accumulated Depreciation-Machinery 69,580 Machinery 69,580 June 30 Depreciation Expense-Forklift 2,940 Accumulated Depreciation-Forklift 2,940 (To record depreciation expense on forklift) June 30 Cash 11,760 Accumulated Depreciation-Forklift 20,580 Gain on sale of Forklift ($11,760+$20,580-$29,400) 2,940 Forklift 29,400 (To record sale of forklift) Dec. 31 Depreciation Expense-Truck 3,724 Accumulated Depreciation-Truck 3,724 (To record depreciation expense on truck) Dec. 31 Accumulated Depreciation-Truck 22,344 Loss on sale of Truck ($32,736-$22,344) 10,392 Truck 32,736 (To record sale of truck)