The following transactions occurred at Wade Company during 2016: DATE TRANSACTIONS Apr. 2 Traded in a copy
Question:
The following transactions occurred at Wade Company during 2016:
DATE TRANSACTIONS
Apr. 2 Traded in a copy machine (Office Equipment) that had been purchased for $5,200 on December 29, 2012. Straight-line depreciation of the old copier has been based on an estimated useful life of five years, with salvage value of $800. The new copier had a purchase price and value of $12,000. Wade received a trade-in allowance of $3,500 on the old machine and paid cash of $8,500. The new copier has a useful life of five years and an estimated salvage value of $600.
July 8 Exchanged a delivery truck (Vehicles) for a new one with a list price of $44,000, estimated useful life of five years and salvage value of $8,400. A trade-in allowance of $10,000 was received on the old truck, which had been purchased on July 1, 2013, for $33,000.
Depreciation on the old truck has been based on an estimated $5,000 salvage value and a five-year life.
Sept. 23 Sold a refrigeration unit (Store Equipment) for cash (see Instruction 2). The unit was purchased on January 3, 2013, for $32,000 and was depreciated on the straight-line basis, using an estimated life of six years and a salvage value of $2,000.
INSTRUCTIONS
In each case, assume that straight-line depreciation is used and that depreciation was last recorded on December 31, 2015. Compute depreciation to the nearest whole dollar.
1. Record in general journal form the two trade-in transactions on April 2 and July 8.
2. Record the sale of the refrigeration unit, assuming:
a. the sales price was $13,500.
b. the sales price was $10,200.
Analyze: What accounting concepts underlie the accounting treatments for the transactions of April 2 and July 8?
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
College Accounting Chapters 1-30
ISBN: 978-0077862398
14th edition
Authors: John Price, M. David Haddock, Michael Farina