Question

Ocean Fishers Ltd had a 22-foot fishing boat with an inboard motor that was purchased on April 9, 2009, for $86,500. The PPE Sub ledger shows the following information regarding the boat: Fishing Boat-22 Foot With Inboard Motor Component Fibreglass body Date of Purchase Apr. 9/09 Apr. 9/09 Deprec. Method SL SL Cost s 25.500 S 6,000 Est. Residual Est. Life 15 yr Motor 61,000 10 yr S 86,500 On June 27, 2017, $67,000 cash was paid for a new motor to replace the old one, which was scrapped. The new motor had an estimated useful life of 12 years and a residual value of $4,000. Early in 2017, it was determined that the useful life of the boat's fibreglass body should be adjusted to a total of 20 years with no change in the residual value Required 1. Record the appropriate entries regarding the a. Purchase of the replacement motor on June 27, 2017. (If no entry is required for a transaction, select "No journal entry required" in the first account field.)

Answer 1

Answer:

Component	Fibreglss	Old Motor	New Motor
Purchase date	09-Apr-09	09-04-2009	27-Jun-17
Cost	25,500	61,000	67,000
Estimated Residual	6,000		4,000
Estimated life	15	10	12
Depreciation=(Cost - Salvage value) Est.life
	Annual Depreciation
Fibreglss(25500-6000)15	1,100
Old Motor(61,000/10)	6,100
New Motor(67000-4,000)/12	5,250
Depreciation
2009	825	4,575	=6,100/12*9	for 9 months from 9 April 2009
2010-2016	7,700	42,700	=6100*7	for 7 years
2017till 27June 2017		3,050	=6,100/12*6	for 6 months ti ll 27 June 2017
Accumulated Dep	8,525	50,325
Net Fixed Asset	16,975	10,675	=61,000-50,325
Scrapped		-
Loss on scrapped motor		10,675
Est. life - revised	20
Est. remaining life -Old	7.25	=15 years -7.75 Years
Est. remaining life - revised	12.25	=7.25 years -5 Years
Depreciation revised =(Net Fixed Asset - Salvage value) Est.revised life
=(16,975-6000)/12.25
Depreciation	Fibreglss	Old Motor
2017	895.91	2,650	=5250/12*6
Accumulated Dep	9,420.91	2,650

Journal entries
Date	Account	Debit($)	Credit($)
27-Jun-17	Depreciation expense - Old Motor	3,050
	Accumulated Depreciation		3,050
	( To record depreciation in 2017 regarding motor being replaced)
27-Jun-17	New Motor	67,000
	Accumulated Depreciation	50,325
	Loss on scrapped asset	10,675
	Old Motor		61,000
	Cash		67,000
	( To record purchase of the replacement motor and old motor scrapped)
31-Dec-17	Depreciation expense - Boat body	896
	Depreciation expense - New Motor	2,650
	Accumulated Depreciation		3,546
	( To record revised depreciation expense on fishing boat)
31-Dec-17	Depreciation expense - Boat body	896
	Depreciation expense - New Motor	2,650
	Depreciation expense - Old Motor	3,050	6,596
	Accumulated Depreciation
	(To record total depreciation on thefishing boat)