Gargon Galactic Food Corporation purchased from Dalicron Tractor & Implement Compay15 new Case IH Magnum Model 380
Question:
Gargon Galactic Food Corporation purchased from Dalicron Tractor & Implement Compay15 new Case IH Magnum Model 380 tractors on October 31 of the current year at a price of $345,180 per tractor. In payment for the tractors, Gargon traded in 20 Case IH PUMA Model 220 CVT tractors for which it had paid $150,000 per tractor 20 years ago, $2,000,000 of cash, and its promissory note for $2,500,000. Accumulated depreciation on each of the Case IH PUMA Model 220 CVT tractors was $63,750 through the date of sale. The new tractors have estimated useful lives at the time of purchase of 20 years, and each tractor has an estimated residual value of $34,618. The company reports on a calendar year basis.
Required:
Prepare the journal entry to record the purchase of the new tractors.
Prepare a complete depreciation schedule, beginning with the current year, under each of the
methods listed below assuming that Gargon employs the half-year convention. 1) Straight-line
2) Double declining balance
C. Four years after buying them, Gargon sells 4 of the tractors for $295,000 cash per tractor. Prepare in good form the journal entry to record the sale under the alternative depreciation methods for which you prepared depreciation schedules in Par B.
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella