Units of activity method 2017 15000 012 1800 1800

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Units-of-Activity Method
2017 15,000 $ 0.12 $ 1,800 $ 1,800 $ 11,200 2018 30,000 0.12 3,600 5,400 7,600 2019 20,000 0.12 2,400 7,800 5,200 2020 25,000 0.12 3,000 10,800 2,200 2021 10,000 0.12 1,200 12,000 1,000 Depreciation Expense 1,800 Accumulated Depreciation 1,800 2017 Journal Entry Illustration: Units-of-Activity Method
Management’s Choice Annual depreciation expense varies considerably among the methods, but total depreciation expense is the same ($12,000) for the five-year period.
ILLUSTRATION 9-12 Comparison of depreciation methods Management’s Choice
Companies dispose of plant assets in three ways — Retirement, Sale, or Exchange. Record depreciation up to the date of disposal . Eliminate asset by (1) debiting Accumulated Depreciation, and (2) crediting the asset account. Explain how to account for the disposal of plant assets.
Compare the book value of the asset with the proceeds received from the sale. If proceeds exceed the book value, a gain on disposal occurs. If proceeds are less than the book value, a loss on disposal occurs. SALE OF PLANT ASSETS
Depreciation Expense8,000 Accumulated Depreciation—Equipment 8,000 Illustration: On July 1, 2017, Wright Company sells office furniture for $16,000 cash. The office furniture originally cost $60,000. As of January 1, 2017, it had accumulated depreciation of $41,000. Depreciation for the first six months of 2017 is $8,000. Prepare the journal entry to record depreciation expense up to the date of sale, July 1. SALE OF PLANT ASSETS
Illustration: Wright records the sale as follows on July 1. SALE OF PLANT ASSETS Cash 16,000 Accumulated Depreciation—Equipment 49,000 Equipment 60,000 Gain on Disposal of Plant Assets 5,000
Illustration: Assume that instead of selling the office furniture for $16,000, Wright sells it for $9,000. SALE OF PLANT ASSETS Cash 9,000 Accumulated Depreciation—Equipment 49,000 Loss on Disposal of Plant Assets 2,000 Equipment 60,000
No cash is received. Decrease (debit) Accumulated Depreciation for the full amount of depreciation taken over the life of the asset. Decrease (credit) the asset account for the original cost of the asset. RETIREMENT OF PLANT ASSETS
Overland Trucking has an old truck that cost $30,000 and has accumulated depreciation of $16,000. Assume two different situations: 1. The company sells the old truck for $17,000 cash. 2.The truck is worthless, so the company simply retires it. What entry should Overland use to record scenario 1?
1. The company sells the old truck for $17,000 cash.

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