Accounting in acquisition and disposition of property plant

Accounting in acquisition and disposition of property, plant and Equipment

8. ON JULY 1, 2013, MACHADO COMPANY PURCHASED A DELIVERY TRUCK FOR $120,000. THE DELIVERY TRUCK HAD AN ESTIMATED USEFUL LIFE OF 6 YEARS. ON MARCH 1, 2018 THE TRUCK WAS SOLD FOR $66,000. MACHADO COMPANY USES THE STRAIGHT-LINE METHOD OF DEPRECIATION. PREPARE THE JOURNAL ENTRY TO RECORD THE DISPOSAL OF THE DELIVERY TRUCK.

Solution

Accumulated depreciation Year Months Depreciation General Journal Debit Credit 2013 6 $          10,000 Cash (Sales value) $        66,000 2014 12 $          20,000 Accumulated depreciation $        95,000 2015 12 $          20,000 Delivery truck $        120,000 2016 12 $          20,000 Gain on sales of delivery truck (66000-(120000-95000) $          41,000 2017 12 $          20,000 2018 3 $            5,000 Total $          95,000 Depreciation formula=purhcase value*no. of months/12*1/life of asset