Kine Company purchased a new Model II computer 2009 October 1. Cash price of the new computer was USD 24,960; Jackson received a trade-in allowance of USD 9,300 from the cash price for a Model I computer. The old computer was acquired on 2007 January 1, at a cost of USD 23,040. Depreciation has been recorded through 2008 December 31, on a straight-line basis, with an estimated useful life of four years and USD 3,840 expected salvage value. The exchange has commercial substance. Prepare the journal entries to record the exchange. Alternate problem D On 2009 July 1, Morgan Company had the following balances in some of its accounts:
|
|
Asset |
Accumulated Depreciation |
|
Land |
$ 672,000 |
|
|
Leasehold |
252,000 |
|
|
Buildings |
3,151,680 |
$369,768 |
|
Equipment |
1,370,880 |
436,800 |
|
Trucks |
238,560 |
71,652 |
The leasehold covers a plot of ground leased on 2004 July 1, for a period of 25 years under an operating lease. The office building is on the leased land and was completed on 2005 July 1, at a cost of USD 967,680; its physical life is set at 40 years. The factory building is on the owned land and was completed on 2004 July 1, at a cost of USD 2,184,000; its life is also set at 40 years with no expected salvage value. The equipment has a 15-year useful life with no expected salvage value. The company owns three trucks—A, B, and C. Truck A, purchased on 2007 July 1, at a cost of USD 53,760, had an expected useful life of three years and a salvage value of USD 3,360. Truck B, purchased on 2008 January 2, at a cost of USD 84,000, had an expected life of four years and an estimated salvage value of USD 6,720. Truck C, purchased on 2009 January 2, at a cost of USD 100,800, had an expected life of five years and an estimated salvage value of USD 10,080. The following transactions occurred in the fiscal year ended 2010 June 30: 2009
July 1 Rent for2009 July 1, through 2010 June 30, on leased land was paid, USD 31,920.
Oct. 1 Truck A was traded in on truck D. Cash price of the new truck was USD 107,520. Cash of USD 90,720 was paid. Truck D has an expected life of four years and a salvage value of USD 5,880. The exchange has no commercial substance. 2010
Feb. 2 Truck B was sold for USD 47,040 cash.
June 1 Truck C was completely demolished in an accident. The truck was not insured. Prepare journal entries to record these transactions and the necessary 2010 June 30, adjusting entries. Use the straight-line depreciation method.