Question

In-class activity # 14 – Plant Asset Calculations

Compute and record depreciation after a change in useful life of the asset - Seven Flags over Georgia paid $180,000 for a concession stand. Seven Flags started out depreciating the building using straight-line over 10 years with zero residual value. After using the concession stand for 6 years, Seven Flags determines that the building will remain useful for only 2 more years. Record Seven Flags’ depreciation on the concession stand for year 7 by the straight-line method.

Date   Accounts and Explanations   Post. Ref.   Debit   Credit
                     
                     
                     
                     

Compute depreciation; record a gain or loss on disposal) - On January 1, 2013, Regal Manufacturing purchased a machine for $850,000. Regal Manufacturing expects the machine to remain useful for eight years and to have a residual value of $40,000. Regal Manufacturing uses the straight-line method to depreciate its machinery. Regal Manufacturing used the machine for five years and sold it on January 1, 2018, for $325,000.

1. Compute accumulated depreciation on the machine at January 1, 2018 (same as December 31, 2017).

Answer 1

Answer:

Original Depreciation per year = 180000-0 / 10 = $18000

Net Book value of concession stand = 180000 - (18000*6) = $72000

Net Book value at beginning of yeasr 7 = 720000

Revised Depreciation expense for remaining years = (Net book value at beginning of year 7 / No of remaining years )
=72000 / 2
=36000 per year Depreciation

Date	Particulars	Debit ($)	Credit ($)
	Depreciation	36000
	Accumulated depreciation - Building		36000

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Accumulate dep. on 31.12.17 = [ ( 850000 - 40000) / 8 ] * 5 = $ 506250

Sale entry :-

Cash	325000
Accumulated depreciation	506250
Loss on sale of machinery	18750
Machinery		850000