Question

Yount Winery is disposing of processing equipment that cost $50,000, which has been depreciated $22,000. Kecord the journal entries for disposal of the equipment under the following assumptions. It was scrapped as having no value. Accumulated Depr Equipment 50,000 22,000 Book Value = It was sold for $31,000 cash. 3 It was sold for $18,000 cash. It was exchanged for $10,000 cash (paid) and similar "new" equipment with a fair market value of $35,000. The "new" equipment has commercial value. 4 5 It was exchanged for $10,000 cash (paid) and similar "new" equipment with a fair market value of $35,000. The "new" equipment has no commercial value. 2.

Answer 1

1) Equipment $50.000 Accumulated Depr. $22.000 Journal Entries: Account Titles and Explanation Accumulated Depreciation Equipment Loss on Disposal of equipment Equipment (To record disposal of equipment) Debit Credit $22.000 $28.000 $50.000 $28.000 Book Value = ($50,000 - $22.000) 2) Credit Debit $31.000 $22,000 Account Titles and Explanation Cash Accumulated Depreciation Equipment Equipment Gain on sale of equipment (To record Sale of equipment) $50,000 $3,000 3) Account Titles and Explanation Cash Accumulated Depreciation Equipment Loss on sale of equipment Equipment (To record Sale of equipment) Debit Credit $18.000 $22.000 $10,000 $50,000 4) Accounts Titles and Explanation Equipment (New) Accumulated Depreciation Equipment Cash Equipment (Old) Gain on exchange of equipment (To record the exchange of equipment) Debit Credit $45,000 $22,000 $10,000 $50,000 $7,000 Workings: Cost of equipment Fair value of equipment Add: Cash Paid Cost of the equipment (new) $35,000 $10,000 $45,000 $35,000 $28.000 Fair market Value of equipment Less: Book value of equipment (old) ($50,000 - $22,000) Gain on exchange of equipment $7.000 5) Accounts Titles and Explanation Equipment (New) Accumulated Depreciation Equipment Equipment (Old) Cash (To record the exchange of equipment) Debit Credit $38.000 $22.000 $50,000 $10,000 Workings: Cost of equipment (old) Less: Accumulated depreciation Book Value $50,000 $22.000 $28.000 Fair Value of equipment Less: Book Value Gain on Exchange $35.000 $28,000 $7,000 Fair Value of New Equipment ($35,000+ $10,000) $45,000 Less: Gain on Exchange $7.000 Cost of New Equipment $38.000