Schmaltz Cable Company's balance sheet reports the following assets under Property, Plant, and Equipment: Land, Buildings, Office
Question:
Schmaltz Cable Company's balance sheet reports the following assets under Property, Plant, and Equipment: Land, Buildings, Office Furniture, Communication Equipment, and Tele-video Equipment. The company has a separate accumulated depreciation account for each of these assets except land. Assume that Schmaltz Cable completed the following transactions:
2017
Jan. 4 Sold communication equipment with accumulated depreciation of $85,000 (cost of
$96,000) for $18,000. Purchased new equipment for $118,000.
June 30 Sold a building that had cost $495,000 and had accumulated depreciation of
$255,000 through December 31 of the preceding year. Depreciation is computed on a straight-line basis. The building has a 40-year useful life and a residual value of
$95,000. The company received $50,000 cash and a $250,000 note receivable.
Nov. 4 Purchased used communication and tele-video equipment from Rogers Cable Company. Total cost was $80,000 paid in cash. An independent appraisal valued the communication equipment at $75,000 and the tele-video equipment at $25,000.
Dec. 31 Depreciation is recorded as follows:
Equipment is depreciated by the double-diminishing-balance method over a five year life with zero residual value. Depreciation is recorded separately on the equipment purchased on January 4 and on November 4.
Requirement
1. Record the transactions in Schmaltz Cable's journal.
2. How does management choose which depreciation method to use?
Step by Step Answer:
Financial Accounting
ISBN: 978-0134564142
6th Canadian edition
Authors: Walter Jr. Harrison, Charles T. Horngren, C. William Thomas, Greg Berberich, Catherine Seguin