On August 26, 2009, Race World International purchased a piece of equipment for a total of $426,000. The PPE Subledger shows the following information regarding the equipment:

Early in 2014, it was determined that the useful life of the metal frame should be adjusted to a remaining life of 20 years with a reduction of $12,000 in the residual value. On October 3, 2014, the company paid $36,000 cash for a new fan to replace the old one, which was sold on the same day to a competitor for $8,400 cash. The new fan had an estimated useful life of five years and a residual value of $4,800.

Required
1. Record the appropriate entries regarding the
a. Purchase of the replacement fan on October 3, 2014, and sale of the old fan, and
b. Depreciation taken on the fan component on December 31, 2014, the company’s year-end.
2. Calculate total depreciation taken on the equipment for Race World’s year ended December 31,2014.

Transcribed Image Text:

Equipment Component Metal frame Engine Fan Conveyor systemAug. 26/09 Misc. parts Date of Purchase Aug. 26/09 Aug. 26/09 Aug. 26/09 Deprec. Method SL DDB SL SL DDB Cost $144,000 96,000 32,400 126,000 27,600 $426,000 Est. Residual 36,000 6,000 3,600 39,600 4,800 Est. Life 20 yrs 10 yrs 5 yrs 10 yrs 5 yrs Aug. 26/09