On August 26, 2018, 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 2023, 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, 2023, 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:

1. Purchase of the replacement fan on October 3, 2023, and sale of the old fan.

2. Depreciation on the equipment on December 31, 2023, the company’s year-end.

2. Calculate total depreciation taken on the equipment for Race World’s year ended December 31, 2023.

Transcribed Image Text:

Component Metal frame Engine Fan Conveyor system Misc. parts Equipment Date of Deprec. Cost Purchase Method Aug. 26/18 SL $144,000 $36,000 Aug. 26/18 DDB 96,000 6,000 Aug. 26/18 SL 32,400 3,600 126,000 39,600 Aug. 26/18 SL Aug. 26/18 DDB 27,600 4,800 $426,000 Est. Residual Est. Life 20 yrs 10 yrs 5 yrs 10 yrs 5 yrs