Concept explainers
Record the disposal of equipment (LO7–6)
Flip Side of P7–2B
New Deli is in the process of closing its operations. It sold its three-year-old owns to Sicily Pizza for $341,000. The ovens originally cost $455,000 and had an estimated service life of 10 wars and an estimated residual value of $30,000. New Deli uses straight-line
Required:
1. Calculate the balance in the
2. Calculate the book value of the ovens at the end of the third year.
3. What is the gain or loss on the sale of the ovens at the end of the third year?
4. Record the sale of the ovens at the end of the third year.
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Chapter 7 Solutions
FINANCIAL ACCOUNTING W/ACCESS >CI<
- 4. The ABC Company purchased a tooling machine in 20X1 for P120,000. The machine was being depreciated on the straight-line method over an estimated useful life of 20 years, with no salvage value. At the beginning of 2021, when the machine had been in use for ten years, the company paid P20,000 to overhaul the machine. As a result of this improvement, the company estimated that the useful life of the machine would be extended an additional five years. What would be the depreciation expense recorded for the above machine in 2021? Round off final answer to the nearest peso.arrow_forward5. On January 1, Mitzu Company pays a lump-sum amount of $2,600,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $793,000, with a useful life of 20 years and a $70,000 salvage value. Land Improvements 1 is valued at $305,000 and is expected to last another 10 years with no salvage value. The land is valued at $1,952,000. The company also incurs the following additional costs. Cost to demolish Building 1 $ 348,400 Cost of additional land grading 187,400 Cost to construct Building 3, having a useful life of 25 years and a $400,000 salvage value 2,202,000 Cost of new Land Improvements 2, having a 20-year useful life and no salvage value 178,000 2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1.arrow_forward2. FiTch, Inc., has purchased a new server and must decide what to do with the old one. The cost of the old server was originally P60,000 and has been depreciated P45,000. The company has received two offers. One offer was to lease the equipment for P7,000 for the next five years, but the company will be required to provide maintenance and insurance totaling P3,000 per year. The other offer was made to purchase the equipment outright for P18,500 less a 5% sales commission. Which offer should FiTCh, Inc., accept? Prepare a differential analysis report to support your answer.arrow_forward
- 6. On January 1, Mitzu Company pays a lump-sum amount of $2,600,000 for land, Building 1, Building 2, and Land Improvements 1. Building 1 has no value and will be demolished. Building 2 will be an office and is appraised at $793,000, with a useful life of 20 years and a $70,000 salvage value. Land Improvements 1 is valued at $305,000 and is expected to last another 10 years with no salvage value. The land is valued at $1,952,000. The company also incurs the following additional costs. Cost to demolish Building 1 $ 348,400 Cost of additional land grading 187,400 Cost to construct Building 3, having a useful life of 25 years and a $400,000 salvage value 2,202,000 Cost of new Land Improvements 2, having a 20-year useful life and no salvage value 178,000 3. Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the first year these assets were in use.arrow_forwardV1. The home was acquired for $83,000 in 2005. On May 12, 2021, the Arcs installed new fixtures (7-year recovery period) at a cost of $3,400. They wish to maximize the cost recovery on the new fixtures but make no elections. how do I calculate Special depreciation allowance for qualified propertyarrow_forwardLO.3 Renata Corporation purchased equipment in 2017 for 180,000 and has taken 83,000 of regular MACRS depreciation. Renata Corporation sells the equipment in 2019 for 110,000. What is the amount and character of Renatas gain or loss?arrow_forward
- 5.The Jones Corp. purchased an investment property on Jan 1, 2017 for a cost of P220,000. The property had a useful life of 40 years and at Dec 31, 2020 had a fair value of P300,000. On Dec 31, 2021 the property was sold for P290,000 incurring disposal costs of P10,000. Jones uses the cost model to account for investment properties. What is the gain or loss to be recognized in profit or loss for the year ended Dec 31, 2021 regarding the disposal of the property?arrow_forwardABC Corp purchased land and building at a lump price of P6M. ABC demolished the building and constructed a new one. Cost of demolition is P30,000 and sold salvaged materials from the demolished building for P7,500. ABC also incurred the following additional costs: Legal fees in titling the land, P10,000 Options paid for the land and building, P3,000 Payment to tenants to vacate the place, P6,000 Construction materials, labor and overhead P4,250,000 Fair values of the land and building were P2.5M and P5M respectively. How much is the cost of the NEW building? PPE intermediate accountingarrow_forwardABC Corp purchased land and building at a lump price of P6M. ABC demolished the building and constructed a new one. Cost of demolition is P30,000 and sold salvaged materials from the demolished building for P7,500. ABC also incurred the following additional costs: Legal fees in titling the land, P10,000 Options paid for the land and building, P3,000 Payment to tenants to vacate the place, P6,000 Construction materials, labor and overhead P4,250,000 Fair values of the land and building were P2.5M and P5M respectively. How much is the cost of the land and old building? 2,000,000 and 4,000,000 2,000,000 and 4,002,000 2,013,000 and 4,006,000 2,033,000 and 4,016,000arrow_forward
- 5. Three years ago, (January 1, 2018), ABC purchased land with a cost of P5,000,000. ABC subsequently measures the land at revalued amount although, from the year of acquisition, the fair value wasn’t significantly different until December 31, 2023, when roads were cemented and a hospital was built nearby. Its fair value has moved up to P8,500,000. Unexpectedly, the company needs money the following year and decides to move to another business location. Eventually, the property was sold for P10,000,000 incurring a cost of P700,000 to sell it. As a result of this transaction, how much is the total impact on its equity? (indicate the word increase or decrease after the amount such as this 100,000 increase)arrow_forward1 QUE A plant asset cost $101700 when it was purchased on January 1, 2011. It was depreciated by the straight-line method based on a 9-year life with no salvage value. On June 30, 2018, the asset was discarded with no cash proceeds. What gain or loss should be recognized on the retirement? $16950 loss. $11300 gain. $22600 loss. No gain or loss. 2 QUE Admire County Bank agrees to lend Vaughn Brick Company $599000 on January 1. Vaughn Brick Company signs a $599000, 8%, 9-month note. What entry will Vaughn Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30? a Notes Payable 634940 Cash 634940 b Notes Payable 599000 Interest Payable 35940 Cash 634940 c Interest Payable 23960 Notes Payable 599000 Interest Expense 11980 Cash 634940 d Interest Expense 35940 Notes Payable 599000…arrow_forwardJT Enterprises decides to scrap its old widget-making machine, which has a book value of $8,600. The salvage company pays JT $8,700 for the machine. How should JT record this disposition? a.) as a $100 loss b.) as a $100 gain c.) as an $8,600 loss d.) as an $8,700 gainarrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT