Problem: Fixed Asset Disposal
This task is a follow on from performance task 1. There is an additional asset (the barbeque grill assembler-please see details of the asset in project A part 2). There is now a modification of the barbeque stamping machine from task 1 which has been sold in this performance task. A barbeque grill assembler was purchased on the 1 December in year 1 for $100,510. It has an effective life of ten years.
On the 30th June (at the end of year 1) the BBQ stamping machine was sold for $135,000.
Using spreadsheet software, you are required to:
1. Calculate the depreciation for the three assets for year one using the straight-line method (prime cost).
2. Calculate the accumulated depreciation for the BBQ stamping Machine at the time of disposal.
3. Calculate the gain/loss on disposal of the BBQ Stamping Machine. Hint: the gain or loss on disposal will be the consideration minus the net book value (purchase price less accumulated depreciation).
4. Prepare a journal entry as at 30 June accounting for the disposal of the BBQ Stamping Machine. Hint, the four accounts that you will need to include depreciation expense, accumulated depreciation, fixed asset, profit or loss on disposal of asset.
Hint: the closing balance of the asset that was sold should have a closing balance of zero in the asset register.
Hint: if the asset was held for only one year the accumulated depreciation amount will be the same as the depreciation amount for that asset for that year.