Question

Price Company had the following assets on January 1, 2022.

Item Cost Purchase Date Useful Life (in years) Salvage Value
Machinery $73,000 Jan. 1, 2012 10 $0
Forklift 32,000 Jan. 1, 2019 5 0
Truck 38,400 Jan. 1, 2017 8 3,000

During 2022, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $12,200. The truck was discarded on December 31.

Required:
Journalize all entries required on the above dates, including entries to update depreciation, where applicable, no disposed assets.

Answer 1

Machinery

Journal 1 - Recognizing disposal

Debit : Accumulated Depreciation $73,000

Credit : Cost $73,000

Forklift

Journal 1 - Updating Depreciation

Debit : Depreciation expense $3,200

Credit : Accumulated depreciation $3,200

Journal 2 - Recognizing disposal

Debit : Cash $12,200

Debit : Accumulated Depreciation $22,400

Credit : Cost $32,000

Credit : Profit and Loss (profit on sale) $2,600

Truck

Journal 1 - Updating Depreciation

Debit : Depreciation expense $4,425

Credit : Accumulated Depreciation $4,425

Journal 2 - Recognizing disposal

Debit : Accumulated Depreciation $26,550

Debit : Profit and Loss (Loss on disposal) $46,450

Credit : Cost $73,000

Step-by-step explanation:

Note : I will assume the straight line method for all the assets above for depreciation purposes.

therefore,

Depreciation = Cost - Salvage Value ÷ Useful Life

Machinery

Annual Depreciation = $7,300

Accumulated Depreciation to date of disposal = $73,000

Forklift

Annual Depreciation = $6,400 ($3,200 for 2022)

Accumulated Depreciation to date of disposal = $22,400

Truck

Annual Depreciation = $4,425

Accumulated Depreciation to date of disposal = $26,550