How is the disposition of a long-term asset like land or equipment or a building recorded in the General Journal

DQ# 1

How is the disposition of a long-term asset like land or equipment or a building recorded in the General Journal?

What is the function of these entries (meaning, what do the accounts that are affected by the entries communicate to readers of the financial statements)?

Prepare journal entries to record the following:

1. Gomez Company retires its delivery equipment, which cost $41,000. Accumulated depreciation is also $41,000 on this delivery equipment. No salvage value is received.

2. Assume the same information as (a), except that accumulated depreciation is $39,000, instead of $41,000, on the delivery equipment.

DQ# 2

Jacobs Company incurs the following expenditures in purchasing a truck: cash price$30,000, accident insurance $2,000, sales taxes $1,500, motor vehicle license $100, and painting and lettering $400.

Identify each cost as either a capital expenditure or a revenue expenditure and discuss why each choice was made.

What is the cost of the truck? (show how you arrived at this amount)

……………………..Answer preview……………………………

DQ# 1

How is the disposition of a long-term asset like land or equipment or a building recorded in the General Journal?

Disposition of a long-term asset may result to a gain or a loss. In case of a loss on the sale of equipment of building, the following shows the recording of the transactions.

                                                                        Debit                           credit

Cash                                                                xxx

Loss on disposition                                         xxx

Accumulated depreciation                              xxx

Equipment/machine (cost)                                                                              xxx

What is the function of these entries (meanings, what do the accounts that are affected by the entries communicate to readers of the financial statements)?

The above entries show the accounts that are affected when a long term asset is affected. Incase of a gain on ale of a long term asset, corresponding entry is made on credit entry. The cost of the recorded fixed asset is reversed along with the corresponding accumulated depreciation. The remaining difference between the cost of the equipment and the accumulated depreciation is treated as a gain or a loss………………………………………………………..

APA

407 words

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