Foster Glass Company purchased a fax machine on July 1, 2007 for $1,800. The fax machine had an estimated useful life of three years and a salvage value of $300. Assume Foster uses the straight-line depreciation method.
Foster decided to replace its fax machine with a bizhub on July 1, 2008, Eagle Outfitters offered to buy the used fax machine from Foster for $1,000 (proceeds received upon purchase)
Record on Foster's books the July 1, 2008 journal entry detailing the sale of the fax machine to Eagle.© BrainMass Inc. brainmass.com June 4, 2020, 1:30 am ad1c9bdddf
The following is the correct answer and a complete explanation of the solution to the problem.
On July 1 2007 the Equipment account would have a debit balance of $1800 (equipment would have been debited and cash or another account credited.) On December 31 2007 the calculation for the depreciation would be for 6 months (July 1 2007 to December 31, 2007) as follows. Original cost $1800 minus $300 salvage value = $1500 divided by 3 years useful life ...
This solution contains an accounting depreciation problem which includes the follow.
1) How to calculate straight-line depreciation for a partial year.
2) How to record a journal entry to show the sale of an old fixed asset, the loss on disposal, and replacement with a new fixed asset.
Although the problem shown here is taken from another accounting text, the detail step-by-step explanation of this topic provides students with a clear understanding of the concept. Thank you for using BrainMass.com. Have a great day!