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?

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Related Book For  book-img-for-question

Financial Accounting

ISBN: 978-0134564142

6th Canadian edition

Authors: Walter Jr. Harrison, Charles T. Horngren, C. William Thomas, Greg Berberich, Catherine Seguin

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