Walker Co. purchased furniture on February 4, 2019, for $70,000 on account. At that time, it was
Question:
Walker Co. purchased furniture on February 4, 2019, for $70,000 on account. At that time, it was expected to have a useful life of five years and a $1,000 residual value. The furniture was disposed of on January 26, 2022, when the company moved to new premises. Walker Co. uses the diminishingbalance method of depreciation with a 20% rate and calculates depreciation for partial periods to the nearest month. The company has a September 30 year end.
Instructions
a. Record the acquisition of the furniture on February 4, 2019.
b. Record depreciation for each of 2019, 2020, and 2021.
c. Record the disposal on January 26, 2022, under the following assumptions:
1. It was scrapped and has no residual value.
2. It was sold for $30,000.
3. It was sold for $40,000.
4. It was traded for new furniture with a catalogue price of $100,000. Walker Co. was given a tradein allowance of $45,000 on the old furniture and paid the balance in cash. Walker Co. determined that the old furniture’s fair value was $30,000 at the date of the exchange.
What are the arguments in favour of recording gains and losses on disposals of property, plant, and equipment as part of profit from operations? What are the arguments in favour of recording them as non-operating items?
Step by Step Answer:
Accounting Principles Volume 1
ISBN: 978-1119502425
8th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak