Question
Shown below are the T accounts relating to equipment that was purchased for cash by a company on the first day of the current year.
Shown below are the T accounts relating to equipment that was purchased for cash by a company on the first day of the current year. The T accounts show the balance in the accounts on January 1 along with the effects of transactions recorded on December 31 of the current year. The equipment was depreciated on a straight-line basis with an estimated useful life of 10 years and a residual value of $100. Part of the equipment was sold on the last day of the current year for cash proceeds while the remaining equipment that was not sold became impaired.
Cash | Equipment | Accumulated DepreciationEquipment | ||||||
Jan. 1 (a) | Jan. 1 1,100 | Dec. 31 | 100 | |||||
Dec. 31 450 | Dec. 31 | 440 | Dec. 31 | 40 | 31 | 55 | ||
Depreciation Expense | Gain on Disposal | Impairment Loss | ||||||
Dec. 31 (b) | Dec. 31 | (c) | Dec. 31 | (d) |
Instructions
Reconstruct the journal entries to record the following and derive the missing amounts:
- Purchase of equipment on January 1. What was the cash paid?
- Depreciation recorded on December 31. What was the depreciation expense?
- Sale of part of the equipment on December 31. What was the gain on disposal?
- Partial impairment loss on the remaining equipment on December 31. What was the impairment loss?
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