Question

Here are selected transactions for Evan’s Corporation for 2014.

Jan. 1   Retired a piece of machinery that was purchased on January 1, 2004. The machine cost $47,000 and had a useful life of 10 years with no salvage value.

Dec. 31  Discarded a delivery truck that was purchased on January 1, 2011. The truck cost $30,000 and was depreciated based on a 6-year useful life with a $3,000 salvage value.

Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Evan’s Corporation uses straight-line depreciation.

Answer 1

Jan 1.

Date	General Journal	Debit	Credit
Jan. 1	Accumulated depreciation	$47,000
	... Equipment		$47,000
	(To record the retirement of machinery)

Dec. 31

Date	General Journal	Debit	Credit
Dec. 31	Depreciation expense	$4,500
	... Accumulated depreciation		$4,500
	(To record the depreciation expense)
Dec. 31	Loss on Disposal	$12,000
	Accumulated Depreciation ($4,500 * 4)	$18,000
	... Equipment		$30,000
	(To record the disposal of equipment)

Depreciation expense (Straight line method) = (Cost - Salvage value) / Years

= ($30,000 - $3,000) / 6

= $4,500