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lianna [129]
3 years ago
14

PB9-2 Recording and Interpreting the Disposal of Long-Lived Assets [LO 9-5] During the current year, Rayon Corporation disposed

of two different assets. On January 1, prior to their disposal, the accounts reflected the following: Asset Original Cost Residual Value Estimated Life Accumulated Depreciation (straight-line) Machine A $ 60,000 $ 11,000 7 years $ 28,000 (4 years) Machine B 14,200 1,925 5 years 7,365 (3 years) The machines were disposed of in the following ways: Machine A: Sold on January 2, for $33,500 cash. Machine B: On January 2, this machine was sold to a salvage company at zero proceeds (and zero cost of removal). Required: 1.&2. Give the journal entries related to the disposal of Machine A and Machine B on January 2 of the current year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Business
1 answer:
sasho [114]3 years ago
7 0

Answer:

Machine A entries

Debit Other income/disposal account (p/l)  $60,000

Credit Asset account $60,000

Being entries to derecognize the cost of the Machine A

Debit Accumulated depreciation account  $28,000

Credit Other income/disposal account (p/l)  $28,000

Being entries to derecognize the accumulated depreciation on Machine A

Debit Cash account  $33,500

Credit Other income/disposal account (p/l)  $33,500

Being entries to record the amount received from the disposal of machine A

<u>Machine B entries</u>

Debit Other income/disposal account (p/l)  $14,200

Credit Asset account $14,200

Being entries to derecognize the cost of the Machine B

Debit Accumulated depreciation account  $7,365

Credit Other income/disposal account (p/l)  $7,365

Being entries to derecognize the accumulated depreciation on Machine B

Explanation:

When the amount received from the disposal of an asset is higher than the carrying value of the asset, the company makes a gain on disposal. The proceed from the disposal of an asset may be recorded in the disposal or other income account.

On disposal, the carrying amount of the asset is derecognized by  

Debit Other income/disposal account (p/l)

Credit Asset account

with the cost of the asset, then,

Debit Accumulated depreciation account

Credit Other income/disposal account (p/l)

With the accumulated depreciation of the asset at the date of disposal,

Furthermore,

Debit Cash account

Credit Other income/disposal account (p/l)

with the amount received from the disposal or sale of the asset

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Funtime Quadcopters plans to sell a standard quadcopter ​(toy drone) for $ 55 and a deluxe quadcopter for $ 85. Funtime purchase
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Answer:

  • <u>Funtime must sell 510 standard quadcopters and 340 deluxe quadcopters every month to breakeven.</u>

<u></u>

  • <u>Funtime must sell 840 standard quadcopters and 560 deluxe quadcopters to earn $ 7,700 monthly.</u>

Explanation:

<u>A. To breakeven, the revenue must equal the total costs.</u>

<u>1. Write the expresssion of revenue</u>

Revenue = price × number of units

Revenue from standard quadcopter

    Naming s the number of standard quadcopters sold:

  • $55 × s = 55s

Revenue from deluxe quadcopter

    Naming d the number of deluxe quadcopters sold:

  • $85 × d = 85d

Total revevue:

  • 55s + 85d

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<u>2. Write the expression of cost</u>

Purchase price of standard quadcopters

  • $45s

Purchase price of deluxe quadcopters

  • $65d

Fixed  monthly expenses

  • $11,900

Total cost:

  • 45s + 65d + 11,900

<u>3. Relation between number of deluxe quadcopters and standard quadcopters</u>

Two deluxe quadcopters for every three standard quadcopters

  • d = (2/3)s

<u>4. Substitute d with (2/3)s in the expressions, writhe the equation and solve</u>

Revenue = 55s + 85(2/3)s

Cost = 45s + 65(2/3)s + 11,900

Revenue = Cost

  • 55s + 85(2/3)s - 45s - 65(2/3)s - 11,900 = 0

Multiply the equation by 3, to eliminate the denominators:

  • 165s + 170s - 135s - 130s - 35,700 = 0

Add like terms and add 35,700 to both sides

  • 70s = 35,700

Divide by 70

  • s = 510

Substitue s in d = (2/3)s

  • d = (2/3)510 = 340.

Therefore, Funtime must sell 510 standard quadcopters and 340 deluxe quadcopters every month to breakeven.

<u>B. To earn $7,700</u>

Profit = revenue - cost

  • 7,700 = 55s + 85(2/3)s - 45s - 65(2/3)s - 11,900

Add 11,900 to both sides

  • 19,600 = 55s + 85(2/3)s - 45s - 65(2/3)s

Mutliply the equation by 3:

  • 58,800 = 165s + 170s - 135s - 130s

Do the operations:

  • 58,800 = 70s

  • s = 58,800 / 70 = 840

d = (2/3)840 = 560

Hence, Funtime must sell 840 standard quadcopters and 560 deluxe quadcopters to earn $ 7,700 monthly.

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In a period when costs are declining and inventory quantities are stable, the lowest cost of goods sold would be reported by usi
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Answer:

LIFO

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To record the lowest cost of goods sold, the ending inventory amount must be high. This would only be high in LIFO whish would not be affected by declining costs.

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Answer: $63,625

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Depreciation per year using Straight line is ignoring the old salavage value,

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= 90,000 * 6

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The overhauling reduces the Accumulated Depreciation balance by it's amount so,

= 540,000 - 193,000

= $347,000

$347,000 is the new Accumulated Depreciation.

The book value of the machinery is therefore,

= 900,000 - 347,000

= $553,000

The calculate the new depreciation expense,

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= $509,000/ 8 years ( 4 years added by overhaul and 4 years remaining from original period)

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Answer:

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In the given scenario, company choosing delay release until the bugs can be worked out is an example of Vaporware.

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3 years ago
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