>> Accounting Basics
Part 1 - Kathy Company
Kathy Company purchased and installed a machine on January 1, 2006 at a total cost of $72,000. Straight-line depreciation was calculated based on the assumption of a five-year life, and no salvage value. The machine was disposed of on July 1, 2009.
1. Prepare the general journal entry to update depreciation to July 1, 2009.
2. Prepare the general journal entry to record the disposal of the machine under each of these three independent situations:
a. The machine was sold for $22,000 cash.
b. The machine was sold for $15,000 cash.
c. The machine was totally destroyed in a fire and the insurance company settled the claim for $18,000 cash.
Part 2 - Kevin Company
Kevin Company had the following transactions involving plant assets during 2008 and 2009. Unless otherwise indicated, all transactions were for cash.
Jan 2: Purchases a truck for $50,000 plus sales taxes of $3,000. The Truck is expected to have a $4,000 salvage value and a 4 year life
Jan 3: Paid $1,500 to have the company name and logo painted on the side of the truck. This will not add to the value of the Advertising Expense
Dec 31: The Company recorded straight-line depreciation of the truck
Jan 5: Paid $5,000 to put a bigger engine in the truck. The new engine is expected to make the truck run more efficiently and will increase the truck's useful life by another year. The salvage value is the same.
Mar 1: Kevin Company paid $2000 to replace a broken tailgate. The tailgate was damaged when a large and heavy box accidently dropped on it.
Dec 31: Recorded Straight-Line Depreciation for a year on the truck.
Please prepare the journal entries to record all of the transactions listed above.