Fundamental Accounting Principles -Hardcover
Fundamental Accounting Principles -Hardcover
22nd Edition
ISBN: 9780077862275
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 10, Problem 5APSA
To determine

Introduction:

Asset is a term used to define a resource owned by a company against which some income will earn in near future and that income will expressed in monetary terms. Recording of an asset is done via journal entry and represented in Balance sheet as an Asset.

Depreciation is a term used to indicate reduction in value of assets occurred due to frequent use, wear and tear, changes in technology etc. it is recorded in statement of accounts as expenditure however there is no outflow of cash.

Straight line method is a method to be used for computing depreciation using Formula under which cost of asset is depreciated equally over the useful life of asset.

To determine:

Journalize the entries of the events occurred

Expert Solution & Answer
Check Mark

Explanation of Solution

Journal entry will be recorded as under:

In the books of Yoshi company

     
     
     
    $
    $
    01.01.2014
    Truck A/c
    Dr.
    22000
     
     
    To Cash A/c
    Cr.
     
    22000
     
    (Being asset recorded)
     
     
     
     
     
     
     
     
    31.12.2014
    Depreciation Expense A/c
    Dr.
    4000
     
     
    To Accumulated Depreciation A/c
    Cr.
     
    4000
     
    (Being Depreciation on Asset (Truck) recorded)
     
     
     
     
     
     
     
     
    31.12.2015
    Depreciation Expense A/c
    Dr.
    5200
     
     
    To Accumulated Depreciation A/c
    Cr.
     
    5200
     
    (Being Depreciation on Asset (Truck) recorded)
     
     
     
     
     
     
     
     
    31.12.2016
    Depreciation Expense A/c
    Dr.
    5200
     
     
    To Accumulated Depreciation A/c
    Cr.
     
    5200
     
    (Being Depreciation on Asset (Truck) recorded)
     
     
     
     
     
     
     
     
    31.12.2016
    Cash A/c
    Dr.
    5300
     
     
    Loss on sale of Truck A/c
    Dr.
    2300

     
    To Trucks A/c
    Cr.
     
    7600
     
    (Being Truck sold in cash recorded)
     
     
     


Explanation:

Year 2014

Given:

Cost of Asset for the year 2014 is $ 22000,
Residual value is $ 2000,
Useful life of Truck is 5 Years

Formula used:

For computation of cost of Truck

    Cost of Truck
    $
    Original value of asset at the beginning of year
    xxxx
    Add: Expenditure capitalized during the year
    xxxx
    Less: Depreciation for the year
    xxxx
    Asset value at the end of year xxxx

For calculating Depreciation under straight line method

Cost of Asset- Residual Value
Useful life of Asset

Calculation:

*Computation of Cost of Truck

    Cost of Truck$
    Cash
    20515
    Sales tax
    1485
    Total22000

$ 22000- $ 2000
    5
$ 20000/5
$ 4000

Year 2015

Given:

Cost of Asset for the year 2015 is $ 18000,
Residual value is $ 2400,
Useful life of truck reduced from 5 years to 4 years, as one year already passed so remaining useful life is 3 years in the year 2015

Formula used:

For computation of cost of Truck

    Cost of Truck
    $
    Original value of asset at the beginning of year
    xxxx
    Add: Expenditure capitalized during the year
    xxxx
    Less: Depreciation for the year
    xxxx
    Asset value at the end of year xxxx

For calculating Depreciation under straight line method

Cost of Asset- Residual Value
Useful life of Asset

Calculation:

*Computation of Cost of Truck

    Cost of Truck$
    Asset value in the year 2014
    22000
    Less: Depreciation for the year 2014
    4000
    Asset value at the beginning of year 201518000

$ 18000- $ 2400
    3
$ 15600/3
$ 5200

Year 2016

Given:

Cost of Asset for the year 2016 is $ 12800,
Residual value is $ 2400,
Remaining useful life of Truck is 2 years in year 2016

Formula used:

For computation of cost of Truck

    Cost of Truck
    $
    Original value of asset at the beginning of year
    xxxx
    Add: Expenditure capitalized during the year
    xxxx
    Less: Depreciation for the year
    xxxx
    Asset value at the end of year xxxx

For calculating Depreciation under straight line method

Cost of Asset- Residual Value
Useful life of Asset

Formula for calculating profit or loss on sale of asset

    Calculation of profit or loss on sale of asset
    $
    Original value of asset
    xxxx
    Less: Depreciation for the used period
    xxxx
    Asset value at the time of sale
    xxxx
    Less: Sale value
    xxxx
    Profit / Loss on sale of Assetxxxx

Calculation:

*Computation of Cost of Truck

    Cost of Truck$
    Asset value in the year 2015
    18000
    Less: Depreciation for the year 2015
    5200
    Asset value at the beginning of year 201612800

$ 12800- $ 2400
    2
$ 10400/2
$ 5200

*Computation of Cost of Truck at the time of sale

    Cost of Truck$
    Truck value at the beginning of year 2016
    12800
    Less: Depreciation for the year 2016
    5200
    Truck value at the time of sale
    7600
    Sale of Truck in Cash
    5300
    Loss on sale of Truck ($ 7600- $ 5300)2300*

*Loss on sale of truck will be recorded as expenses under Profit & Loss A/c

Conclusion

Events and transaction are recorded in the form of journal entries as and when it occurred.

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Chapter 10 Solutions

Fundamental Accounting Principles -Hardcover

Ch. 10 - Prob. 11DQCh. 10 - Prob. 12DQCh. 10 - Prob. 13DQCh. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Prob. 16DQCh. 10 - Prob. 17DQCh. 10 - Prob. 18DQCh. 10 - Prob. 19DQCh. 10 - Prob. 20DQCh. 10 - Prob. 21DQCh. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - On January 2,2015. the Matthews Band acquires...Ch. 10 - Units-of-production On January 2,2015. the...Ch. 10 - Prob. 5QSCh. 10 - Prob. 6QSCh. 10 - Prob. 7QSCh. 10 - Prob. 8QSCh. 10 - Prob. 9QSCh. 10 - Prob. 10QSCh. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 15QSCh. 10 - Prob. 1ECh. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Exercise 10-5 Units-of-production depreciation P1...Ch. 10 - Exercise 10-6 Double-declining-balance...Ch. 10 - Prob. 7ECh. 10 - Exercise 10-8 Double-declining-balance...Ch. 10 - Prob. 9ECh. 10 - Exercise 10-10 Double-declining-balance...Ch. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Prob. 14ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Prob. 18ECh. 10 - Prob. 19ECh. 10 - Prob. 20ECh. 10 - Prob. 21ECh. 10 - Prob. 22ECh. 10 - Prob. 23ECh. 10 - Prob. 24ECh. 10 - Prob. 25ECh. 10 - Prob. 1APSACh. 10 - Problem 1O-2A Depreciation methods P1 A machine...Ch. 10 - Prob. 3APSACh. 10 - Prob. 4APSACh. 10 - Prob. 5APSACh. 10 - Prob. 6APSACh. 10 - Problem 1O7A Natural resources P3 On July 23 of...Ch. 10 - Prob. 8APSACh. 10 - Prob. 1BPSBCh. 10 - Problem 10-28 Depreciation methods P1 On January...Ch. 10 - Prob. 3BPSBCh. 10 - Prob. 4BPSBCh. 10 - Prob. 5BPSBCh. 10 - Problem 1O-6B Disposal of plant assets C1 P1 P2 On...Ch. 10 - Problem 10-78 Natural resources P3 On February 19...Ch. 10 - Prob. 8BPSBCh. 10 - Prob. 10SPCh. 10 - Refer to the financial statements of Apple in...Ch. 10 - Prob. 2BTNCh. 10 - Prob. 3BTNCh. 10 - Prob. 4BTNCh. 10 - Prob. 5BTNCh. 10 - Each ream member is to become an expert on one...Ch. 10 - Prob. 7BTNCh. 10 - Prob. 8BTNCh. 10 - Prob. 9BTN
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Accounting for Derivatives_1.mp4; Author: DVRamanaXIMB;https://www.youtube.com/watch?v=kZky1jIiCN0;License: Standard Youtube License
Depreciation|(Concept and Methods); Author: easyCBSE commerce lectures;https://www.youtube.com/watch?v=w4lScJke6CA;License: Standard YouTube License, CC-BY