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Chapter 10
Intermediate Accounting (Act411)
East West University
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CHAPTER 10
Acquisition and Disposition of Property, Plant, and
Equipment
BE10-8 Navajo Corporation traded a used truck (cost $20,000, accumulated depreciation $18,000) for a small computer worth $3,300. Navajo also paid $500 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)
SOLUTION BE 10- Computer 3, Accumulated Depreciation—Trucks 18, Trucks 20, Cash 500 Gain on Disposal of Trucks 800
BRIEF EXERCISE 10-9 Use the information for Navajo Corporation from BE10-8. Prepare the journal entry to record the exchange, assuming the exchange lacks commercial substance.
SOLUTION 10- Equipment ($3,300 – $800) 2, Accumulated Depreciation—Trucks 18,
Trucks 20, Cash 500
Mehta Company traded a used welding machine (cost $9,000, accumulated depreciation $3,000) for office equipment with an estimated fair value of $5,000. Mehta also paid $3,000 cash in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)
SOLUTION 10- Equipment 5, Accumulated Depreciation—Machinery 3, Loss on Disposal of Machinery 4, Machinery 9, Cash 3,
BRIEF EXERCISE 10-
Cheng Company traded a used truck for a new truck. The used truck cost $30,000 and has accumulated depreciation of $27,000. The new truck is worth $37,000. Cheng also made a cash payment of
$36,000. Prepare Cheng’s entry to record the exchange. (The exchange lacks commercial substance.) SOLUTION 10- Trucks (new) 37, Accumulated Depreciation—Trucks 27, Loss on Disposal of Trucks 2, Trucks (used) 30, Cash 36,
Ottawa Corporation purchased machinery for $20,000 on July 1, 2011. Depreciation has been recorded at a rate of $2,400 per year, resulting in a balance in accumulated depreciation of $8,400 at December 31, 2014. The machinery is sold on September 1, 2015, for $10,500. Prepare journal entries to (a) update depreciation for 2015 and (b) record the sale.
SOLUTION 10-
(a) Depreciation Expense ($2,400 X 8/12) 1, Accumulated Depreciation—Machinery 1,
(b) Cash 10, Accumulated Depreciation—Machinery ($8,400 + $1,600) 10, Machinery 20, Gain on Disposal of Machinery 500
Use the information presented for Ottawa Corporation in BE10-14, but assume the machinery is sold for $5,200 instead of $10,500. Prepare journal entries to (a) update depreciation for 2015 and (b) record the sale.
SOLUTION 10-
(a) Depreciation Expense ($2,400 X 8/12) 1, Accumulated Depreciation—Machinery 1,
(b) Cash 5, Loss on Disposal of Machinery 4, Accumulated Depreciation—Machinery ($8,400 + $1,600)
10,
Machinery 20,
Chapter 10
Course: Intermediate Accounting (Act411)
University: East West University
