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This post addresses recording the disposal of an asset.

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On January 1, 2004, Skyline Limousine Co. purchased a limousine at an acquisition cost of $28,000. Skyline depreciated the vehicle by the straight-line method using a 4-year service life and a $4,000 salvage value. The company's fiscal year ends on December 31.

Instructions:

Explain what you found to be the most challenging part of the problems? Explain why:
When you are Prepare the journal entry or entries to record the disposal of the limousine assuming that it was.
a. Retired and scrapped with no salvage value on January 1, 2008.
b. Sold for $5,000 on July 1, 2007

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Solution Summary

The solution provides the complete journal entry and explanation needed to dispose of the limousine for Skyline Limousine Co.

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Solution in attached Word document.

Usually, the calculations involving depreciation are the most challenging parts of depreciation problems, because multiple calculations can be involved for each required journal entry. If one calculation is wrong, the entire journal entry will also be wrong. In regards to the first scenario, if Skyline Limousine Co. retired and scrapped the asset with no salvage value on January 1, 2008, the ...

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