Question

The following transactions occurred during 2025. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year.

Jan, 30 A building that cost $163,680 in 2008 is torn down to make room for a new building. The wrecking contractor was paid $6,324 and was permitted to keep all materials salvaged
Mar 10 Machinery that was purchased in 2018 for $19,840 is sold for $3,596 cash, fo.b. purchaser's plant. Freight of $372 is paid on the sale of this machinery,
Mar. 20 A gear breaks on a machine that cost $11,160 in 2017, The gear is replaced at a cost of $2,480. The replacement does not extend the uneful life of the machine but does make the machine more efficient.
May 18 A special base installed for a machine in 2019 when the machine was purchased has to be replaced at a cost of
$6.820 because of defective workmanship on the original bave. The cost of the machinery was $17,608 in 2019. The cost of the base was $4,340, and this amount was charged to the Machinery account in 2019,
June 23 One of the buildings is repainted at a cost of $8.556. It had not been painted since it was constructed in 2021

Prepare general journal entries for the transactions. (Record journal entries in the onder presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries)

Answer 1

The journal entries for the transactions involve recognizing the disposal of fixed assets, recording the sale of machinery, expensing repair costs, capitalizing the replacement of a special base, and expensing the repainting of a building.

Step-by-step explanation:

When approaching the accounting transactions presented, we must consider the principles of depreciation and expense recording. Since the question requests general journal entries for the transactions, we identify the nature of each transaction to treat them appropriately in the financial statements. Depreciation expense is applied to machinery and buildings, and any costs enhancing the benefits of assets or restoring them are capitalized, while costs that merely maintain assets are expensed.

1. Building demolition: The building cost is removed from the books, along with accumulated depreciation to date. The payment to the contractor is recorded as an expense.
2. Machinery sale: The machinery's book value is removed, recognizing any gain or loss on the sale. The cash receipt and freight costs are also recorded.
3. Gear replacement: Since the gear replacement makes the machine more efficient, but does not extend its useful life, the cost is expensed.
4. Special base replacement: The defective base's cost is removed from the books, and the new base cost is capitalized.
5. Building repainting: Repainting a building is typically an expense as it maintains the property rather than enhances its value.