Question

Corporation recently decided to dispose of a significant portion of its plant assets. The assets to...

Corporation recently decided to dispose of a significant portion of its plant assets. The assets to be held for disposal are summarized​ here:

Description Machinery Equipment
cost 696,700 1,551,500
accumulated depreciation (348,350)

(620,600)
Net Book Value at year end 348,350 930,900
Machinery is depreciated by the straight line method assuming a 6 year life with no scrap value. The asset was acquired 3 years ago.
Equipment is depreciated by the straight line method, assuming a 10 year life with no scrap value. The asset was acquired 4 years ago.

At the time the decision was made to dispose of the​ assets, the book values of the assets approximated their fair values.

Assume that costs to sell the assets are zero. When the assets were held for​ disposal, the following changes in fair value​ occurred:

Year Machinery Equipment
end of year 1 fair value 200,700 900,800
end of year 2 fair value 215,500 950,100

Requirement Prepare any journal entries necessary to account for the changes in fair value for Years 1 and 2.

Accumulated Depreciation - Machinery 348,350
Machinery Held for Sale 348,350
Machinery 696,700
Accumulated Depreciation - Equipment 620,600
Equipment Held for Sale 930,900
Equipment 1,551,500
Loss on Machinery Held for Sale ?
Machinery Held for Sale ?
Loss on Equipment Held for Sale ?
Equipment Held for Sale ?
Machinery Held for Sale ?
Gain on Machinery Held for Sale ?
Machinery Held for Sale ?
Gain on Machinery Held for Sale ?
Equipment Held for Sale ?
Gain on Equipment Held for Sale ?

* I only need the answers where question marks are!

Business   Accounting   
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Homework Answers

Answer #1
Date General journal Debit Credit
Amount in $ Amount in $
End of year 1 Loss on machinery held for sale 147650 =348350-200700 i.e Book value-Fair value at the end of year 1
Machinery held for sale 147650
End of year 1 Loss on equipment held for sale 30100 =930900-900800 i.e Book value-fair value at the end of year 1
Equipment held for sale 30100
End of Year 2 Machinery held for sale 14800 =215500-200700 i.e Fair value at the end of Year 2 minus fair value at the end of year 1
Gain on machinery held for sale 14800
End of Year 2 Equipment held for sale 30100 =930900-900800 i.e Book value minus fair value at the end of year 1
Gain on equipment held for sale 30100
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