Seaside Inc. recorded the following transactions over the life of a piece of equipment purchased in 2013:

Jan. 1, 2013 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 straight-line method.

Dec. 31, 2013 Recorded depreciation expense for 2013.

May 5, 2014 Undertook routine repairs costing $900.

Dec. 31, 2014 Recorded depreciation expense for 2014.

Jan. 1, 2015 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, 2015 Recorded depreciation expense for 2015.

Mar. 1, 2016 Incurred $410 cost to oil and clean the equipment.

Dec. 31, 2016 Recorded depreciation expense for 2016.

Jan. 1, 2017 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, 2017 Recorded depreciation expense for 2017.

July 1, 2018 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 amount of depreciation expense Seaside will report on the income statements for the years 2013 through 2017.
c. Determine the book value (cost – accumulated depreciation) Seaside will report on the balance sheets at the end of the years 2013 through 2017.
d. Determine the amount of the gain or loss Seaside will report on the disposal of the equipment on July 1, 2018.
e. Prepare the journal entry for the disposal of the equipment on July 1,2018.

Transcribed Image Text:

Date Assets LiabilitiesE Equity Net Inc. Cash Flovw Jan. 1, 2013- NA NA NA IA