Financial Act Chpt 9 Notes

Calculate the depreciation up until the point of

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: spose or sell it) then need to do two things: 1. Calculate the depreciation up until the point of disposal 2. Calculate the gain or loss on disposal Example: Using the example above: Suppose Cainas decides to use the Straight Line Method of depreciation for 2009 and then on June 30, 2010, she decides to sell the kitchen equipment for \$10,000 and buy new, more energy efficient equipment. What entry would she need to make? 1. Calculate Depreciation until the point of disposal. Depreciation in 2009 was taken for \$6,000, so book value of the asset at 12/31/2009 was \$14,000 (\$20,000 - \$14,000). Need to record depreciation for first 6 months of 2010 (so, \$6,000 year x 6/12 = \$3,000) Book Depreciation to "catch up" to point of disposal first. Depreciation Expense \$3,000 Accumulated Depreciation-Equipment \$3,000 2. Calculate Gain or Loss on Disposal Book value at time of disposal was \$11,000 (\$20,000-\$6,000-\$3,000). Selling price was \$10,000, so, had loss of \$1,000. When recording the entry, need to book the cash received, the loss, and eliminate both the accumulated depreciation account and the equipm...
View Full Document

Ask a homework question - tutors are online