Question

Presented below are selected transactions at Novak Corp. for 2020. Jan. 1 Retired a piece of machinery that was purchased on January 1, 2010. The machine cost $62,300 on that date. It had a useful life of 10 years with no salvage value. June 30 Sold a computer that was purchased on January 1, 2017. The computer cost $42,600. It had a useful life of 5 years with no salvage value. The computer was sold for $13,400. Dec. 31 Discarded a delivery truck that was purchased on January 1, 2016. The truck cost $42,300. It was depreciated based on a 6-year useful life with a $3,000 salvage value. Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Novak Corp. uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2019.)

Answer 1

Answer:

See below.

Explanation:

For Machinery we make the following entry,

Accumulated depreciation debit by $62,300

                                         Machinery account credit by $62,300

For Computer disposal we make the following record,

Accumulated Depreciation debit by $25,560

Loss on disposal Debit by $3,640

Cash debit by $13,400

                                            Computer credit by $42,600

The total book value of the asset at time of sale was $17,040 so a loss is recorded. Depreciation for 3 years is applicable.

For Delivery truck we make the following records,

Debit the accumulated depreciation for truck account by $26,200

Debit loss on asset disposal of $16,100

                                             Credit Delivery truck by $42,300

We assume that the entire asset was fully depreciated incurring a loss on disposal as no information whether the salvage value was recovered is shown. We record the entire net book value after 4 years as loss.

Hope that helps.