The following are some transactions of Ivanhoe Company for 2024. Ivanhoe Company uses straight-line depreciation and has a December 31 year end

Apr. 1

July 30

Nov. 1

Retired a piece of equipment that was purchased on January 1, 2015, for $50,000. The equipment had an expected useful life of 10 years with no residual value.

Sold equipment for $1,700 cash. The equipment was purchased on January 3, 2022, for $13,680 and was depreciated over an expected useful life of three years with no residual value.

Traded in an old vehicle for a new vehicle, receiving a $10,000 trade-in allowance and paying $36,000 cash. The old vehicle had been purchased on November 1, 2018, at a cost of $36,200. The estimated useful life was eight years and the estimated residual value was $6,200. The fair value of the old vehicle was $8,500 on November 1, 2024.

(a

For each of these disposals, prepare a journal entry to record depreciation from January 1, 2024, to the date of disposal, if required. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. List debit entry before credit entry. Record journal entries in the order presented in the problem.)

To properly record the depreciation from January 1, 2024, to the date of disposal for each transaction, we need to calculate the depreciation for the relevant period and then prepare the journal entries for each.

### 1. **April 1 - Retired equipment purchased on January 1, 2015**

- **Cost of Equipment:** $50,000
- **Useful Life:** 10 years
- **Residual Value:** $0
- **Depreciation Method:** Straight-line

Since the equipment was purchased on January 1, 2015, it would have been fully depreciated by December 31, 2024. The annual depreciation would be:
\[
\text{Annual Depreciation} = \frac{50,000 - 0}{10} = 5,000 \text{ per year}
\]
From January 1, 2024, to April 1, 2024, is 3 months of depreciation. So the depreciation for the period would be:
\[
\text{Depreciation for 3 months} = 5,000 \times \frac{3}{12} = 1,250
\]
**Journal Entry:**
```
April 1
   Depreciation Expense       1,250
      Accumulated Depreciation        1,250
```

---

### 2. **July 30 - Sold equipment purchased on January 3, 2022**

- **Cost of Equipment:** $13,680
- **Useful Life:** 3 years
- **Residual Value:** $0
- **Depreciation Method:** Straight-line

Annual depreciation:
\[
\text{Annual Depreciation} = \frac{13,680 - 0}{3} = 4,560 \text{ per year}
\]
From January 1, 2024, to July 30, 2024, is 7 months of depreciation. So the depreciation for the period would be:
\[
\text{Depreciation for 7 months} = 4,560 \times \frac{7}{12} = 2,660
\]
**Journal Entry:**
```
July 30
   Depreciation Expense       2,660
      Accumulated Depreciation        2,660
```

---

### 3. **November 1 - Traded in vehicle purchased on November 1, 2018**

- **Cost of Vehicle:** $36,200
- **Useful Life:** 8 years
- **Residual Value:** $6,200
- **Depreciation Method:** Straight-line

Annual depreciation:
\[
\text{Annual Depreciation} = \frac{36,200 - 6,200}{8} = 3,750 \text{ per year}
\]
From January 1, 2024, to November 1, 2024, is 10 months of depreciation. So the depreciation for the period would be:
\[
\text{Depreciation for 10 months} = 3,750 \times \frac{10}{12} = 3,125
\]
**Journal Entry:**
```
November 1
   Depreciation Expense       3,125
      Accumulated Depreciation        3,125
```

---

### Summary of Journal Entries:

1. **April 1:**
   ```
   Depreciation Expense       1,250
      Accumulated Depreciation        1,250
   ```

2. **July 30:**
   ```
   Depreciation Expense       2,660
      Accumulated Depreciation        2,660
   ```

3. **November 1:**
   ```
   Depreciation Expense       3,125
      Accumulated Depreciation        3,125
   ```

Would you like help with the next part of this question, or any clarifications on these journal entries?

---

Here are some related questions to explore this further:

1. How would the gain or loss on disposal be calculated for each transaction?
2. What are the journal entries for the disposal or sale of these assets?
3. How would depreciation differ under a declining-balance method?
4. What is the impact on financial statements from the sale of equipment?
5. How does the trade-in of an old asset affect the cost basis of the new asset?

---

**Tip:** When using the straight-line depreciation method, always ensure that depreciation is prorated when assets are bought or sold in the middle of the year.

The following are some transactions of Ivanhoe Company for 2024. Ivanhoe Company uses straight-line depreciation and has a December 31 year end: Apr. 1 Retired a piece of equipment purchased on January 1, 2015, for $50,000. The equipment had an expected useful life of 10 years with no residual value. July 30 Sold equipment for $1,700 cash. The equipment was purchased on January 3, 2022, for $13,680 and was depreciated over an expected useful life of three years with no residual value. Nov. 1 Traded in an old vehicle for a new vehicle, receiving a $10,000 trade-in allowance and paying $36,000 cash. The old vehicle had been purchased on November 1, 2018, at a cost of $36,200. The estimated useful life was eight years and the estimated residual value was $6,200. The fair value of the old vehicle was $8,500 on November 1, 2024.

Learn how to calculate and record straight-line depreciation for Ivanhoe Company's asset disposals in 2024. This guide provides a step-by-step approach to preparing journal entries for equipment retirement, sale, and trade-in transactions, with calculations based on relevant financial data.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation