Page 477 - Accounting Principles (A Business Perspective)

11. Plant asset disposals, natural resources, and intangible assets

c. Prepare the journal entries to record the disposal of the truck on 2010 July 1, under each of the following
unrelated assumptions:
i. The truck was sold for USD 26,250 cash.

ii. The truck was sold for USD 48,000 cash.
iii. The truck was retired from service, and it is expected that USD 20,625 will be received from the
sale of salvaged materials.
iv. The truck and USD 60,000 cash were exchanged for office equipment that had a cash price of
USD 105,000. The exchange has commercial substance.
v. The truck and USD 67,500 cash were exchanged for a new delivery truck that had a cash price of
USD 112,500. The exchange has no commercial substance.

vi. The truck was completely destroyed in an accident. Cash of USD 25,500 is expected to be
recovered from the insurance company.
Problem C Eagle Moving Company purchased a new moving van on 2009 October 1. The cash price of the new
van was USD 33,750, and the company received a trade-in allowance of USD 5,600 for a 2007 model. The balance
was paid in cash. The 2007 model had been acquired on 2007 January 1, at a cost of USD 22,500. Depreciation has
been recorded through 2008 December 31, on a straight-line basis, with three years of expected useful life and no
expected salvage value. The exchange has no commercial substance.
Prepare journal entries to update the depreciation and to record the exchange of the moving vans.
Problem D On 2009 January 1, Moyer Company had the following balances in some of its accounts:

Accumulated
Asset Depreciation
Land $ 624,000
Leasehold 780,000
Buildings 3,425,760 $ 286,650
Equipment 2,995,200 1,389,960
Trucks 449,280 158,790
• The leasehold covers a plot of ground leased on 2005 January 1, for a period of 20 years.

• Building No. 1 is on the owned land and was completed on 2008 July 1, at a cost of USD 1,965,600; its life is
set at 40 years with no salvage value. Building No. 2 is on the leased land and was completed on 2005 July 1, at
a cost of USD 1,460,160; its life is also set at 40 years with no expected salvage value.
• The equipment had an expected useful life of eight years with no estimated salvage value.
• Truck A, purchased on 2007 January 1, at a cost of USD 149,760, had an expected useful life of 2 1/2 years
and a salvage value of USD 9,360. Truck B, purchased on 2007 July 1, at a cost of USD 131,040, had an

expected life of two years and an estimated salvage value of USD 21,840. Truck C, purchased on 2008 July 1, at
a cost of USD 168,480, had an expected life of three years and an estimated salvage value of USD 21,060.
The following transactions occurred in 2009:
Jan. 2 Rent for 2009 on leased land was paid, USD 87,360.
April 1 Truck B was traded in for truck D. The cash price of the new truck was USD 149,760. A trade-in
allowance of USD 28,080 was granted from the cash price. The balance was paid in cash. Truck D has an expected
life of 20 years and an estimated salvage value of USD 9,360. The exchange has commercial substance.
1 Truck A was sold for USD 28,080 cash.

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