Question

Problem 7-8A Record the disposal of equipment (LO7-6) The following information applies to the questions displayed below.) New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest Bakery for $650,000. The ovens originally cost $855,000, had an estimated service life of 10 years, had an estimated residual value of $55,000, and were depreciated using straight-line depreciation. Complete the requirements below for New Morning Bakery. Problem 7-8A Part 4 4. Record the sale of the ovens at the end of the second year. (If no entry is required for a transaction/event, select "No Journa Entry Required in the first account field.) View transaction list Journal entry worksheet Record the sale of ovens. Note: Enter debits before credits

Answer 1

Journal entry:

Account title	Debit	Credit
Cash Loss on sale of oven ($695000 - $650000) Accumulated depreciation on oven Oven	$650000 $45000 $160000 .	. . . $855000

Book value at the end of the 2nd year = historical cost - accumulated depreciation

= $855000 - ($80000 x 2)

= $695000

Under straight line method of depreciation,

Depreciation per annum = (initial cost - salvage value)/useful life

= ($855000 - $55000)/10

= $80000