Question

Crane Company had the following assets on January 1, 2022.

Item Cost Purchase Date Useful Life (in years) Salvage Value
Machinery $59,000 Jan. 1, 2012 10 $0
Forklift 18,000 Jan. 1, 2019 5 0
Truck 24,400 Jan. 1, 2017 8 3,000

During 2022, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $10,800. The truck was discarded on December 31.

Required:
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, 2021.

Answer 1

Date Account and explanation Debit Credit

Jan 1,2022 Accumulated Depreciation $59,000

Machinery $59,000

(To machinery retired on Jan 1)

June 30,2022 Depreciation expenses($3,600*6/12) $1,800

Accumulated Depreciation($3,600*6/12) $1,800

(To depreciation charged for 6 months)

June 30,2022 Cash $10,800

Accumulated Depreciation $12,600

Gain on isposal of Forklift $5,400

Forklift $18,000

(To Forklift disposed with profit)

Dec 31,2022 Depreciation expenses $2,675

Accumulated Depreciation $2,675

(To depreciation charged for year)

Dec 31,2022 Accumulated Depreciation $16,050

Loss on retiremnt $8,350

Truck $24,400

Answer 2

Answer:

Machinery

J1

Accumulated Depreciation -Machinery $59,000 (debit)

Cost $59,000 (credit)

Accumulated Depreciation = ($59,000 / 10) × 10 = 59,000

forklift

J1

Depreciation - forklift $1,800 (credit)

Accumulated Depreciation - forklift $1,800 (credit)

Depreciation Calculation = (18,000/5)×1/2 = $1,800

J2

Cash $10,800 (debit)

Accumulated Depreciation - forklift $12,600 (debit)

Profit and Loss $5,400 (credit)

Cost $18,000 (credit)

Accumulated Depreciation = (18,000/5)×3+1,800 = 12,600

Truck

J1

Depreciation - Truck $2,675 (credit)

Accumulated Depreciation - Truck $2,675 (credit)

Depreciation Calculation = (24,400 - 3,000 / 8) = $2,675

J2

Accumulated Depreciation -Truck $16,050 (debit)

Profit and Loss $8,350 (debit)

Cost $24,400 (credit)

Accumulated Depreciation = (24,400 - 3,000 / 8) × 6 = 16,050

Explanation:

Machinery

Accumulated Depreciation = ($59,000 / 10) × 10 = 59,000

forklift

Depreciation Calculation = (18,000/5)×1/2 = $1,800

Accumulated Depreciation = (18,000/5)×3+1,800 = 12,600

Truck

Depreciation Calculation = (24,400 - 3,000 / 8) = $2,675

Accumulated Depreciation = (24,400 - 3,000 / 8) × 6 = 16,050