Rane Company had the following assets on January 1, 2017. Item Cost Purchase Date Useful Life (in years) Salvage Value
Machinery $69,580 Jan. 1, 2007 10 $0
Forklift 29,400 Jan. 1, 2014 5 0
Truck 32,736 Jan. 1, 2012 8 2,944
During 2017, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $11,760. The truck was discarded on December 31.
Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on disposed assets. The company uses straight-line depreciation. All depreciation was up to date as of December 31, 2016.

Journal entries are prepared below

Explanation:

Journal entries required are given as follows

Jan. 1 (To record retirement of machinery)  

                                                                     Debit        Credit

Accumulated depreciation-equipment     $69,580

Equipment                                                                   $69,580

June. 30(To record the depreciation expense on forklift)

                                                                     Debit        Credit

Depreciation expense                                2940

Accumulated depreciation-equipment                       2940

Working

Annual depreciation = $29,400 / 5 years = $5880

depreciation for 6 months = $5880 x 6/12 = $2940

June. 30(To record sale of forklift)

                                                                        Debit        Credit

Cash                                                                 11760  

Accumulated depreciation-equipment(w)    20580  

Equipment                                                                      29400

Gain on disposal of plant assets                                     2940

Working

Accumulated depreciation = 5880 x 3.5 years

Dec. 31(To record depreciation expense on truck)

                                                                     Debit        Credit

Depreciation expense                                 3724

Accumulated depreciation-equipment                       3724

Working

Annual depreciation on truck = ($32,736- $2,944) / 8 years = $3724

Depreciation for 2017 = $3724

Dec. 31(To record discarding of the truck)  

                                                                     Debit        Credit

Salvaged materials                                    2,944

Accumulated depreciation-equipment    22344

Loss on disposal of plant assets               7448

Equipment                                                                    32,736

Working

Accumulated depreciation = 3724 x 6 years = 22,344

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