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    E10-6, E10-8: depreciation, amortization, gain; adjustments

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    E10-6 Presented below are selected transactions at Thomas Company for 2006.

    Jan. 1 Retired a piece of machinery that was purchased on January 1, 1996. The machine cost $62,000 on that date. It had a useful life of 10 years with no salvage value.

    June 30 Sold a computer that was purchased on January 1, 2003.The computer cost $35,000. It had a useful life of 5 years with no salvage value. The computer was sold for $12,000.

    Dec. 31 Discarded a delivery truck that was purchased on January 1, 2002. The truck cost $33,000. It was depreciated based on a 6-year useful life with a $3,000 salvage value.

    Instructions

    Journalize all entries required on the above dates, including entries to update depreciation,where applicable, on assets disposed of. Thomas Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2005.)

    E10-8 The following are selected 2006 transactions of Yosuke Corporation.

    Jan. 1 Purchased a small company and recorded goodwill of $150,000. Its useful life is indefinite.

    May 1 Purchased for $60,000 a patent with an estimated useful life of 5 years and a legal life of 20 years.

    Instructions

    Prepare necessary adjusting entries at December 31 to record amortization required by the events above.

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    Solution Preview

    E10-6

    Machinery
    1-1-1996 $62000
    Depreciation SL 10 years with no salvage
    Accumulated depreciation as of 12-31-05 is 62000 / 10 yrs x 10 years = $62000

    Journal Entry
    Debit Accumulated depreciation $62000
    Credit Machinery ($62000)
    To record the retirement of a fully depreciated machine.

    Computer
    1-1-2003 $35000
    Depreciation SL 5 years with no salvage
    Accumulated depreciation as of 12-31-05 is 35000 / 5 x 3 years = $21000
    Sold on June 30, ...

    Solution Summary

    The solution explains each calculation and displays each journal entry in response to required questions.

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