Tringle Inc. recorded the following transactions over the life of a piece of equipment purchased in
Year 1:
Jan. 1, Year 1 Purchased the equipment for $38,000 cash. The equipment is estimated to have a five-year life and $3,000 salvage value and was to be depreciated using the straightline method.
Dec. 31, Year 1 Recorded depreciation expense for Year 1.
May 5, Year 2 Undertook routine repairs costing $900.
Dec. 31, Year 2 Recorded depreciation expense for Year 2.
Jan. 1, Year 3 Made an adjustment costing $4,000 to the equipment. It improved the quality of the output but did not affect the life and salvage value estimates.
Dec. 31, Year 3 Recorded depreciation expense for Year 3.
Mar. 1, Year 4 Incurred $410 cost to oil and clean the equipment.
Dec. 31, Year 4 Recorded depreciation expense for Year 4.
Jan. 1, Year 5 Had the equipment completely overhauled at a cost of $9,000. The overhaul was estimated to extend the total life to seven years and revised the salvage value to $2,500.
Dec. 31, Year 5 Recorded depreciation expense for Year 5.

July 1, Year 6 Sold the equipment for $8,500 cash.

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 decrease, and NA for not affected. The first event is recorded as an example.

b. Determine the amount of depreciation expense Tringle will report on the income statements for Year 1 through Year 5.
c. Determine the book value (cost − accumulated depreciation) Tringle will report on the balance sheets at the end of Year 1 through Year 5.
d. Determine the amount of the gain or loss Tringle will report on the disposal of the equipment on July 1, Year 6.

Transcribed Image Text:

Date Stk. Equity Assets Llabilitles Net Inc. Cash Flow Jan. 1, Year 1 NA NA NA IA