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frozen [14]
3 years ago
6

Prine Company purchased equipment on January ​1, 2018​, for $ 25 comma 000. Suppose Prine Company sold the equipment for $ 3 com

ma 000 on December 31 comma 2019. Accumulated Depreciation as of December ​31, 2019​, was $ 16 comma 000. Journalize the sale of the​ equipment, assuming​ straight-line depreciation was used.
Required:
a. Calculate any gain or loss on the sale of the equipment.
b. Journalize the sale of the equipment
Business
1 answer:
Marat540 [252]3 years ago
4 0

Answer:

a. The company recognizes loss on the sale of the equipment $6,000

b. The entry to record the sale of the equipment:

Debit Cash $3,000

Debit Accumulated depreciation account $16,000

Debit Loss on sale equipment  $6,000

Credit Equipment $25,000

Explanation:

To recognize gain or loss on the sale of the equipment:

First, the company calculates the carrying amount of the asset by using the original cost of the asset, minus all accumulated depreciation and any accumulated impairment charges.

Then, subtract this carrying amount from the sale price of the asset. If the remainder is positive, it is a gain and if the remainder is negative, it is a loss

On December ​31, 2019​, the carrying amount of the asset = $25,000 - $16,000 = $9,000

Sale price - Carrying amount of the asset = $3,000 - $9,000 = -$6,000

=> The company recognizes loss on the sale of the equipment $6,000

b. The entry to record the sale should be made:  

Debit Cash $3,000

Debit Accumulated depreciation account $16,000

Debit Loss on sale equipment  $6,000

Credit Equipment $25,000

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5 0
3 years ago
Alpha Communications, Inc., which produces telecommunications equipment in the United States, has a very strong local market for
CaHeK987 [17]

Answer:

1-If the transfer price is set equal to the U.S. variable manufacturing cost, Alpha Communications will have a profit of $32.80 per circuit board with US Share as $0 and German Share as $32.80.

2-If the transfer price is set equal to the U.S. market price, Alpha Communications will have a profit of $39.20 per circuit board with US Share as $24 and German Share as $15.20. The transfer price as US market price is more effective for the Alpha Communications.

3:a- If the German division can obtain the boards in Germany for 155, it is better for the German division because due to lack of additional shipping fee and import duty, this price is more feasible for the German division.

3:b- If the company decide to sell the US circuit boards locally and allow German division to obtain the circuit boards in Germany, then Alpha Communication will have a profit of $60 per circuit board with US Share as $24 and German Share as $36.

Explanation:

1-If the transfer price is set equal to the U.S. variable manufacturing cost, Alpha Communications will have a profit of $32.80 per circuit board. The calculations are as follows:

US Operation:

Sales Revenue(Price set to variable manufacturing cost): $130

Variable Manufacturing Cost:                                              : ($130)

_________________________________________________

Contribution Margin                                                            : $ 0

German Operation:

Selling Price:                                                                         $360

Transfer Price:                                                                      ($130)

Additional Cost:                                                                    ($115)

Shippng Cost:                                                                       ($20)

Import Duty (10% of Transfer Price): 10% x 130=0.1x130=    ($13)

_________________________________________________

Income Before Tax:                                                             $82

Income Tax (60% of Income Before Tax):60%x82           ($49.20)

___________________________________________________

Income After Tax                                                                 $32.80

2-If the transfer price is set equal to the U.S. market price, Alpha Communications will have a profit of $39.20 per circuit board. The transfer price as US market price is more effective for the Alpha Communications. The calculations are as follows:

US Operation:

Sales Revenue(Price set to variable manufacturing cost): $170

Variable Manufacturing Cost:                                              : ($130)

_________________________________________________

Income Before Tax                                                                : $ 40

Income Tax (40% of Income Before Tax):40%x40              :($16)

_________________________________________________

Income After Tax:                                                                   : $24

German Operation:

Selling Price:                                                                         $360

Transfer Fee:                                                                        ($170)

Additional Cost:                                                                    ($115)

Shippng Cost:                                                                       ($20)

Import Duty (10% of Transfer Price): 10% x 170=0.1x170=    ($17)

_________________________________________________

Income Before Tax:                                                             $38

Income Tax (60% of Income Before Tax):60%x38           ($22.80)

___________________________________________________

Income After Tax                                                                 $15.20

Total Income By Alpha Communication: $24+$15.20=$39.20

3-a: If the German division can obtain the boards in Germany for 155, it is better for the German division because due to lack of additional shipping fee and import duty, this price is more feasible for the German division.

At the lower tranfer price of 130, the total impact of transfer is given by

Transfer Price:                                                                       $130

Shippng Cost:                                                                        $20

Import Duty (10% of Transfer Price): 10% x 130=0.1x130=    $13

___________________________________________________

Total Impact                                                                          $163

It is more than the local available price, Thus the company should purchase their circuit board locally.

3-b If the company decide to sell the US circuit boards locally and allow German division to obtain the circuit boards in Germany, then Alpha Communication will have a profit of $60 per circuit board.

US Operation:

Sales Revenue(Price set to variable manufacturing cost): $170

Variable Manufacturing Cost:                                              : ($130)

_________________________________________________

Income Before Tax                                                                : $ 40

Income Tax (40% of Income Before Tax):40%x40              :($16)

_________________________________________________

Income After Tax:                                                                   : $24

German Operation:

Selling Price:                                                                         $360

Local Circuit Board Price                                                     ($155)

Additional Cost:                                                                    ($115)

_________________________________________________

Income Before Tax:                                                             $90

Income Tax (60% of Income Before Tax):60%x38           ($54)

___________________________________________________

Income After Tax                                                                 $36

Total Income By Alpha Communication: $24+$36=$60.0

3 0
3 years ago
A company completes 21,000 units this month and has ending goods in process inventory of 3,000 units which are estimated to be 4
kolezko [41]

Answer:

Total cost of transferred to finished goods inventory  = $ 136,500

Explanation:

To value cost of transferred finished goods, we multiply the cost per equivalent unit of production (cost per EUP) by the the number of equivalent units (EUP) for each of the cost element.

So the value of the finished inventory, is determined as follows:

Value of inventory = cost per E.U.P × number of E.U.P

Direct Material = $5.00 × 21,000 =$ 105,000

Conversion cost = $1.50 × 21,000= $31,500

Total cost of transferred to finished goods inventory =

$ 105,000 + $31,500

= $ 136,500

5 0
3 years ago
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