New Morning Bakery is in the process of closing its operations. It sold its twoyear- old bakery
Question:
New Morning Bakery is in the process of closing its operations. It sold its twoyear- old bakery ovens to Great Harvest Bakery for $600,000. The ovens originally cost $800,000, had an estimated service life of 10 years, and an estimated residual value of $50,000. New Morning Bakery uses the straight-line depreciation method for all equipment.
Required:
1. Calculate the balance in the Accumulated Depreciation account at the end of the second year.
2. Calculate the book value of the ovens at the end of the second year.
3. What is the gain or loss on the sale of the ovens at the end of the second year?
4. Record the sale of the ovens at the end of the second year.
Step by Step Answer:
NEW MORNING BAKERY Sold two year old bakery ovens 600000 Original cost of ovens 8...View the full answer
Financial Accounting
ISBN: 9780078110825
2nd Edition
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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