Vexa Corporation incurred the following expenditures for the purchase and use of equipment which was placed into
Question:
Vexa Corporation incurred the following expenditures for the purchase and use of equipment which was placed into service on March 31, 2016.
Expenditure | Amount |
List price of the equipment | $38,200 |
Sales taxes | $2,700 |
Advertising costs | $380 |
Insurance on the equipment after installation | $1,200 |
Delivery charges | $550 |
Set up costs | $450 |
Repairs due to accidental damages during installation | $330 |
Custom duties | $600 |
Power and other operating costs for using the machine during the year | $3,600 |
The company estimated the useful life of the equipment to be 6 years with an expected salvage value of $2,180. The straight-line method for depreciation was selected. On June 30, 2018, the company observed that if it exchanges the equipment for a new similar one, the result will be more productivity and an increase in total revenues. Accordingly, a decision was taken on that date to exchange it for a new similar one. On June 30, 2018, the old equipment’s fair value was $25,500, and the value of the new equipment was $35,000.
Required:
Prepare the journal entry to record the disposal of the equipment on June 30, 2018. (Show all your necessary calculations)
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello