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Assignment 2 Equipment was acquired on January 1, 2021, at a cost of $12,000
Assignment 2
Equipment was acquired on January 1, 2021, at a cost of $12,000. The equipment was originally
estimated to have a salvage value of $1,000 and an estimated life of 10 years. Depreciation has been
recorded through to December 31, 2024, using the straight-line method. On January 1, 2025, the
estimated salvage value was revised to $1,200 and the useful life was revised to a total of 8 years.
Required:
Prepare the journal entries required to record the Depreciation expense for 2025.
Assignment 3
Pinetreee Company purchased equipment in 2021 for $40,000 and estimated a $4,000 salvage value
at the end of the equipment's 10-year useful life. On December 31, 2027 there was $25,200 in the
Accumulated Depreciation account after recording Depreciation for the year using the straight-line
method. On March 1, 2028 the equipment was sold for $10,500 cash.
Required:
Prepare the journal entries required to record the sale of the equipment by Johnson Company on
March 1, 2028.
Assignment 4
Lansdowne Company exchanged an old equipment on Dec 31 (cost $40,000 less $25,000
accumulated Depreciation) plus $2,500 cash for a new equipment. The old
equipment had a market value of $13,000. Prepare the entry to record the exchange
of assets by Lansdowne Company.
Required:
Prepare the journal entries required to record the sale of the equipment by Johnson Company on
March 1, 2021.
Expert Solution
Assignment 2
| Original cost | 12000 |
| Less: Depreciation for 4 years 2021 to 2024 (12000-1000)*4/10 | 4400 |
| Carrying value on 01.01.2025 | 7600 |
| Remaining useful life (8 - 4) years | 4 years |
| Depreciation for for the year 2025 (7600-1200)/4 | 1600 |
| 31.12.2025 | Depreciation | 1600 | |
| To accumulated depreciation - equipment | 1600 |
Assignment 3
| 28.02.2028 | Depreciation | 600 | |
| To accumulated depreciation -equipment | 600 | ||
|
(Being depreciation expense for 01.01.2028 to 28.02.2028) [(40000-4000)/10 ]*2/12 = 3600*2/12=600 |
|||
| 01.03.2028 | Accumulated Depreciation - equipment (25200+600) | 25800 | |
| Cash | 10500 | ||
| Loss on sale of equipment | 3700 | ||
| To equipment | 40000 | ||
| (Being sale of equipment ) |
Assignment 4
One or more items of property, plant and equipment may be acquired in exchange for a non-monetary asset or assets, or a combination of monetary and non-monetary assets. The cost of such an item of property, plant and equipment is measured at fair value unless:
a) the exchange transaction lacks commercial substance; or
b) the fair value of neither the asset received nor the asset given up is reliably measurable.
If an entity is able to measure reliably the fair value of either the asset received or the asset given up, then the fair value of the asset given up is used to measure the cost of the asset received unless the fair value of the asset received is more clearly evident.
Assuming the transaction has commercial substance,
| 31 Dec | Equipment (new) | 13000 | |
| Accumulated depreciation | 25000 | ||
| Loss on exchange of assets | 4500 | ||
| To equipment (old) | 40000 | ||
| To cash | 2500 |
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