Question

The following transactions occurred during 2017. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year.

Jan. 30		A building that cost $190,080 in 2000 is torn down to make room for a new building. The wrecking contractor was paid $7,344 and was permitted to keep all materials salvaged.
Mar. 10		Machinery that was purchased in 2010 for $23,040 is sold for $4,176 cash, f.o.b. purchaser’s plant. Freight of $432 is paid on the sale of this machinery.
Mar. 20		A gear breaks on a machine that cost $12,960 in 2009. The gear is replaced at a cost of $2,880. The replacement does not extend the useful life of the machine but does make the machine more efficient.
May 18		A special base installed for a machine in 2011 when the machine was purchased has to be replaced at a cost of $7,920 because of defective workmanship on the original base. The cost of the machinery was $20,448 in 2011. The cost of the base was $5,040, and this amount was charged to the Machinery account in 2011.
June 23		One of the buildings is repainted at a cost of $9,936. It had not been painted since it was constructed in 2013. Please show your work with calculations if needed.

Answer 1

Jan 30 * Accumulated Depreciation - Building 161568

** Loss on disposal of Plant Assets 35856

Buildings 190080

Cash 7344

*(190080 X 5% = 9504, 9504 X 17 = 161568)

**(190,080 - 161568 = 28512 +7344 = 35856)

Mar 10 Cash (4176 - 432) 3744

Accumulated Depeciation - Machinery 16128

Loss on disposal of Plant Assets 3168

Machinery 23040

*(23040 X 10% = 2304, 2304 X 7 = 16128)

**(23040 - 16128 = 6912)

6912 + 432 - 4176 = 3168)

Mar 20 Machinery 2880

Cash 2880

May 18 Machinery 7920

Accumulated Depreciation - Machinery 3024

Loss on Disposal of Plant Assets 2016

Machinery 5040

Cash 7920

*(5040 X 10% = 504 , 504 X 6 = 3024)

**(5040 - 3024 = 2016)

June 23 Building Maintainence and Repair expense 9936

Cash 9936