Discarding of a fully depreciated asset On June 15, 2017, Family Furniture discarded equipment that cost $27,000, a residual value of $0, and was fully depreciated. Journalize the disposal of the equipment
Accumulated Depreciation is not a process of valuation. Businesses do not record depreciation based on changes in the asset’s market value.
The term disposal on equipment refers to the process of eliminating the value of the equipment from the company's books of account. This helps the company reduce the value of the asset according to its age and use in the business.
Account & Explanation
Recording partial-year depreciation and sale of an asset On January 2, 2017, Comfy Clothing Consignments purchased showroom fixtures for $17,000 cash, expecting the fixtures to remain in service for five years. Comfy has depreciated the fixtures on a double-declining-balance basis, with zero residual value. On October 31, 2018, Comfy sold the fixtures for $7,600 cash. Record both depreciation expense for 2018 and sale of the fixtures on October 31, 2018.
Recording partial-year depreciation and sale of an asset On January 2, 2016, Pet Spa purchased fixtures for $37,800 cash, expecting the fixtures to remain in service for six years. Pet Spa has depreciated the fixtures on a straight-line basis, with $9,000 residual value. On May 31, 2018, Pet Spa sold the fixtures for $24,200 cash. Record both depreciation expense for 2018 and sale of the fixtures on May 31, 2018
: Distinguishing capital expenditures from revenue expenditures consider the following expenditures:
a. Purchase price.
b. Ordinary recurring repairs to keep the machinery in good working order.
c. Lubrication before machinery is placed in service.
d. Periodic lubrication after machinery is placed in service.
e. Major overhaul to extend useful life by three years.
f. Sales tax paid on the purchase price.
g. Transportation and insurance while machinery is in transit from seller to buyer.
i. Training of personnel for initial operation of the machinery. Classify each of the expenditures as a capital expenditure or revenue expenditure
94% of StudySmarter users get better grades.Sign up for free