Question: Garcia Co. owns equipment that cost $76,800, with accumulated depreciation of $40,800. Garcia sells the equipment for cash. Record the sale of the equipment under the following three separate cases assuming Garcia sells the equipment for (1) $47,000 cash, (2) $36,000 cash, and (3) $31,000 cash
Depreciation is the overall reduction in the book value of the asset because of its regular use or wear and tear.
Sale above book value: If Gracia Co. receives an amount above the equipment’s book value, a gain on disposal occurs. The entry is
Gain on Disposal of Equipment
(Record sale of equipment for a $11,000 gain.)
Sale at Book Value: If Garcia Co. receives an amount equal to the equipment’s book value, no gain or loss occurs on disposal. The entry is
(Record sale of equipment for no gain or loss.)
Sale below Book Value: If Garcia Co. receives an amount below the equipment’s book value, a loss on disposal occurs. The entry is
Loss on Disposal of Equipment
(Record sale of equipment for a loss of $5,000.)
Calculation of book value
Question: Rodriguez Company pays $375,280 for real estate plus $20,100 in closing costs. The real estate consists of land appraised at $157,040; land improvements appraised at $58,890; and a building appraised at $176,670. Allocate the total cost among the three purchased assets and prepare the journal entry to record the purchase.
Question: In early January 2017, NewTech purchases computer equipment for $154,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $25,000. Prepare a table showing depreciation and book value for each of the four years assuming double-declining-balance depreciation.
Question: Perez Company acquires an ore mine at a cost of $1,400,000. It incurs additional costs of $400,000 to access the mine, which is estimated to hold 1,000,000 tons of ore. The estimated value of the land after the ore is removed is $200,000.
Prepare the entry(ies) to record the cost of the ore mine.
Prepare the year-end adjusting entry if 180,000 tons of ore are mined and sold the first year.
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