Morris Inc. recorded the following transactions over the life of a piece of equipment purchased in 2016:

Question:

Jan. 1, 2016 ....Purchased equipment for $90,000 cash. The equipment was estimated to have a five-year life and $5,000 salvage value and was to be depreciated using the straight-line method.

Dec. 31, 2016 ...Recorded depreciation expense for 2016.

Sept. 30, 2017 ...Undertook routine repairs costing $900.

Dec. 31, 2017 ...Recorded depreciation expense for 2017.

Jan. 1, 2018 ...Made an adjustment costing $2,500 to the equipment. It improved the quality of the output but did not affect the life and salvage value estimates.

Dec. 31, 2018 Recorded depreciation expense for 2018. June 1, 2019 incurred $850 cost to oil and cleans the equipment.

Dec. 31, 2019 ....Recorded depreciation expense for 2019.

Jan. 1, 2020 ....Had the equipment completely overhauled at a cost of $9,000. The over haul was estimated to extend the total life to seven years. The salvage value did not change.

Dec. 31, 2020 ...Recorded depreciation expense for 2020.

Oct. 1, 2021 ...Received and accepted an offer of $19,000 for the equipment.

Required

a. Use a horizontal statements model like the following one to show the effects of these transactions on the elements of the financial statements. Use + for increase, - for d e crease, and NA for not affected. The first event is recorded as an example.

Morris Inc. recorded the following transactions over the life of

b. Determine the amount of depreciation expense to be reported on the income statements for the years 2016 through 2020.
c. Determine the book value (cost - accumulated depreciation) Morris will report on the balance sheets at the end of the years 2016 through 2021.
d. Determine the amount of the gain or loss Morris will report on the disposal of the equipment on October 1, 2021.
e. Prepare the journal entry for the disposal of the equipment on October 1, 2021.

Salvage Value
Salvage 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...