Jijang Excavations Ltd. (“JEL”) operates specialized equipment for installing natural gas pipelines. JEL, which has a December 31 year end, began 2016 with a single piece of equipment that had been purchased on January 1, 2013, for $40,000 and a truck that had been purchased on January 1, 2015, for $60,000. When the equipment was purchased, JEL’s management had estimated that the equipment would have a residual value of $4,000 and a useful life of six years. When the truck was purchased, management determined that it would have a useful life of four years and a residual value of $5,000.
On March 31, 2016, JEL sold this piece of equipment for $29,000 cash. On April 12, 2016, JEL purchased replacement equipment with double the capacity for $82,000 cash. JEL’s management determined that this equipment would have a useful life of six years and a residual value of $10,000.
Prepare all necessary journal entries for the year ended December 31, 2016. Assume that JEL uses the straight-line depreciation method for its equipment and the double-diminishing-balance method for its trucks.