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And productive life of the unit debit repair or

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Unformatted text preview: s new fair value during the year in which the decline in value occurs. Chapter 9-37 SO 4 Describe the procedure for revising periodic depreciation. Accounting for Plant Assets Accounting for Plant Assets Plant Asset Disposals Companies dispose of plant assets in three ways —Retirement, Sale, or Exchange (appendix). Illustration 9-16 Record depreciation up to the date of disposal. Eliminate asset by (1) debiting Accumulated Depreciation, and (2) crediting the asset account. Chapter 9-38 SO 5 Explain how to account for the disposal of a plant asset. Plant Asset Disposals Plant Asset Disposals Sale of Plant Assets Compare the book value of the asset with the proceeds received from the sale. Chapter 9-39 If proceeds exceed the book value, a gain on disposal occurs. If proceeds are less than the book value, a loss on disposal occurs. SO 5 Explain how to account for the disposal of a plant asset. Plant Asset Disposals Plant Asset Disposals Illustration: On July 1, 2012, Wright Company sells office furniture for $16,000 cash. The office furniture originally cost $60,000. As of January 1, 2012, it had accumulated depreciation of $41,000. Depreciation for the first six months of 2012 is $8,000. Prepare the journal entry to record depreciation expense up to the date of sale. July 1 Depreciation expense Accumulated depreciation Chapter 9-40 8,000 8,000 SO 5 Explain how to account for the disposal of a plant asset. Plant Asset Disposals Plant Asset Disposals Illustration 9-17 Computation of gain on disposal Illustration: Wright records the sale as follows. July 1 Cash 16,000 Accumulated depreciation 49,000 Equipment Gain on disposal Chapter 9-41 60,000 5,000 SO 5 Explain how to account for the disposal of a plant asset. Plant Asset Disposals Plant Asset Disposals Illustration: Assume that instead of selling the office furniture for $16,000, Wright sells it for $9,000. Illustration 9-18 Computation of loss on disposal July 1 Cash 9,000 Accumulated depreciation 49,000 Equipment Loss on disposal Chapter 9-42 60,000 2,000 SO 5 Explain how to account for the disposal of a plant asset. Plant Asset Disposals Plant Asset Disposals Retirement of Plant Assets Decrease (debit) Accumulated Depreciation for the full amount of depreciation taken over the life of the asset. Chapter 9-43 No cash is received. Decrease (credit) the asset account for the original cost of the asset. SO 5 Explain how to account for the disposal of a plant asset. Plant Asset Disposals Plant Asset Disposals Illustration: Assume that Hobart Enterprises retires its computer printers, which cost $32,000. The accumulated depreciation on these printers is $32,000. The journal entry to record this retirement is? Accumulated depreciation Printing equipment 32,000 32,000 Question: What happens if a fully depreciated plant asset is still useful to the company? Chapter 9-44 SO 5 Explain how to account for the disposal of a plant asset. Analyzing Plant Assets Analyzing Plant Assets Return on Asset Ratio indi...
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This note was uploaded on 09/27/2013 for the course MGT 11A taught by Professor Armstrong during the Fall '08 term at UC Davis.

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