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# Reds Co equipment account has a balance of \$833,000 at 1/1/05... Compute balances and book values (various situations)

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Reds Co equipment account has a balance of \$833,000 at 1/1/05. The related accumulated depreciation account was \$239,000 on 12/31/05. During 2005, the following post-acquisition events involving the equipment occurred:

a) allocated cost of the equipment used during 2005 in a systematic manner \$94,000

b) equipment (A/D=\$37,000; loss=\$21,000) was sold for cash \$84,000

c) ordinary repairs were made on equipment \$41,000

d) parts, considered minor in nature, were replaced on the equipment as part of routine maintenance \$28,000

e) performed a major overhaul on equipment, increasing its life (book value not known) \$139,000

f) productivity of equipment (cost=\$189,000; accumulated depreciation=\$128,000) was increased by replacing outdated parts \$228,000

g) upgraded the equipment (cost=\$61,000; book value=\$15,000) with improved parts, thereby enhancing the quality of the output \$87,000

Compute the :
1) 12/31/05 balance of the equipment
2) 1/1/05 balance of accumulated depreciation
3) book value of the equipment at 12/31/05
4) change (amt and direction) in book value of equipment FYE 12/31/05

CLUE must match!! Effect on income from the 7 events is a net \$260,000 decrease

#### Solution Preview

The way I generally like to solve problems like this is with t-accounts, so I formatted some in Excel (** see attachment **):

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Then, as I make journal entries (some of these clues give you info for at least a partial entry) I debit and credit the appropriate accounts. In places where I don't have a beginning balance, such as with Accumulated Depreciation, I leave the amount blank on the top line in the t-account.

So the first couple of entries are pretty easy, and I filled in ...

#### Solution Summary

You will find the answer to this puzzling assignment inside...

\$2.19