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Cullumber Company had the following assets on January 1, 2025:

| Item | Cost | Purchase Date | Useful Life (in years) | Salvage Value |
|----------|-------|---------------|------------------------|----------------|
| Machinery | \[tex]$72,000 | Jan. 1, 2015 | 10 | \$[/tex]0 |
| Forklift | \[tex]$31,000 | Jan. 1, 2022 | 5 | \$[/tex]0 |
| Truck | \[tex]$37,400 | Jan. 1, 2020 | 8 | \$[/tex]3,000 |

During 2025, each of the assets was removed from service:
- The machinery was retired on January 1.
- The forklift was sold on June 30 for \$12,100.
- The truck was discarded on December 31.

Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on disposed assets. The company uses straight-line depreciation. All depreciation was up to date as of December 31, 2024.

Date:
Account Titles and Explanation
Debit
Credit



Answer :

GinnyAnswer
Let's go through each asset and determine the necessary journal entries.

### 1. Machinery Retired on January 1, 2025

Machinery Details:
- Cost: [tex]$72,000 - Purchase Date: Jan. 1, 2015 - Useful Life: 10 years - Salvage Value: $[/tex]0

Since the machinery was purchased on January 1, 2015, it had been in use for 10 years by the end of 2024, which is its entire useful life. The accumulated depreciation for the machinery is its full cost.

Journal Entry on January 1, 2025:
```markdown
Date: Jan. 1, 2025
```
| Account Titles and Explanation | Debit | Credit |
|----------------------------------------------|-----------|-----------|
| Accumulated Depreciation - Machinery | [tex]$72,000 | | | Machinery | | $[/tex]72,000 |

### 2. Forklift Sold on June 30, 2025

Forklift Details:
- Cost: [tex]$31,000 - Purchase Date: Jan. 1, 2022 - Useful Life: 5 years - Salvage Value: $[/tex]0

First, calculate the annual depreciation for the forklift:
[tex]\[ \text{Annual Depreciation} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}} = \frac{31000 - 0}{5} = 6200 \][/tex]

As of December 31, 2024, the forklift had been in use for 3 years (2022, 2023, and 2024):
[tex]\[ \text{Accumulated Depreciation as of Dec. 31, 2024} = 3 \times 6200 = 18600 \][/tex]

The forklift was sold on June 30, 2025. We do not need to calculate additional depreciation for 2025 since we are given that depreciation was up to date as of the end of 2024.

Journal Entry on June 30, 2025:
- Cash received: [tex]$12,100 - Book value of the forklift: Cost - Accumulated Depreciation = $[/tex]31,000 - [tex]$18,600 = $[/tex]12,400
- Loss on Sale: Book value - Sale Cash: [tex]$12,100 - $[/tex]12,400 = [tex]$300 ```markdown Date: June 30, 2025 ``` | Account Titles and Explanation | Debit | Credit | |----------------------------------------------------|-----------|-----------| | Cash | $[/tex]12,100 | |
| Accumulated Depreciation - Forklift | [tex]$18,600 | | | Loss on Sale of Forklift | $[/tex]300 | |
| Forklift | | [tex]$31,000 | ### 3. Truck Discarded on December 31, 2025 Truck Details: - Cost: $[/tex]37,400
- Purchase Date: Jan. 1, 2020
- Useful Life: 8 years
- Salvage Value: [tex]$3,000 First, calculate the annual depreciation for the truck: \[ \text{Annual Depreciation} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}} = \frac{37400 - 3000}{8} = 4312.5 \] As of December 31, 2024, the truck had been in use for 5 years (2020, 2021, 2022, 2023, and 2024): \[ \text{Accumulated Depreciation as of Dec. 31, 2024} = 5 \times 4312.5 = 21562.5 \] The truck was discarded on December 31, 2025. Since depreciation was up to date as of the end of 2024, the accumulated depreciation does not need updating for 2025. Journal Entry on December 31, 2025: ```markdown Date: Dec. 31, 2025 ``` | Account Titles and Explanation | Debit | Credit | |-----------------------------------------|-------------|-------------| | Accumulated Depreciation - Truck | $[/tex]21,500 | |
| Truck | | $37,400 |

By following these steps, we have successfully journalized all entries required for the disposed assets as requested.

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