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earnstyle [38]
3 years ago
5

Berning Company purchased a tractor at a cost of $540,000. The tractor has an estimated salvage value of $60,000 and an estimate

d life of 8 years, or 10,000 hours of operation. The tractor was purchased on January 1, 2019 and was used 2,400 hours in 2019 and 2,100 hours in 2020. On January 1, 2021, the company decided to sell the tractor for $210,000. Berning uses the units-of-production method to account for the depreciation on the tractor. Based on this information, the entry to record the sale of the tractor will show:
Business
1 answer:
hjlf3 years ago
8 0

Answer:

Berning Company

Journal Entry to record the sale of Tractor:

Jan. 1, 2021:

Debit Sale of Tractor $540,000

Credit Equipment (Tractor) $540,000

To transfer the cost of tractor to Sale of Tractor.

Debit Accumulated Depreciation - Tractor $216,000

Credit Sale of Tractor $216,000

To transfer the depreciation to Sale of Tractor.

Debit Cash Account $210,000

Credit Sale of Tractor $210,000

To record the cash receipts from the sale.

Explanation:

a) Determination of Accumulated Depreciation for the Tractor:

Depreciable amount = $480,000 ($540,000 - $60,000)

Depreciable rate = $48 ($480,000/10,000) per hour

2019 Depreciation Expense =  $115,200 ($48 x 2,400)

2020 Depreciation Expense = $100,800 ($48 x 2,100)

Accumulated Depreciation = $216,000

b) Calculation of the Book Value = Cost - Accumulated Depreciation

= $540,000 - $216,000 = $324,000

c) Gain or Loss on Sale:  The sales proceed is compared with the book value to determine if there is a gain or loss from the sale.  In this case, there is a loss of $114,000 ($324,000 - $210,000), which will be transferred to the Income Summary.

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Margie has had a tough month.​ First, she had dental work that cost ​$700. ​Next, she had her car transmission​ rebuilt, which c
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Calculate amount of annual interest:

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