Track Inc. recorded the following transactions over the life of a piece of equipment purchased in 2013:
Jan. 1, 2013 Purchased equipment for $80,000 cash. The equipment was estimated to have a five year life and $5,000 salvage value and was to be depreciated using the straight line method.
Dec. 31, 2013 Recorded depreciation expense for 2013.
Sept. 30, 2014 Undertook routine repairs costing $750.
Dec. 31, 2014 Recorded depreciation expense for 2014.
Jan. 1, 2015 Made an adjustment costing $3,000 to the equipment. It improved the quality of the output but did not affect the life and salvage value estimates.
Dec. 31, 2015 Recorded depreciation expense for 2015.
June 1, 2016 Incurred $620 cost to oil and clean the equipment.
Dec. 31, 2016 Recorded depreciation expense for 2016.
Jan. 1, 2017 Had the equipment completely overhauled at a cost of $8,000. The overhaul was estimated to extend the total life to seven years. The salvage value did not change.
Dec. 31, 2017 Recorded depreciation expense for 2017.
Oct. 1, 2018 Received and accepted an offer of $18,000 for the equipment.
Required:
a. Use a horizontal statements model like the following one to show the effects of these transactions on the elements of the financial statements. Use + for increase, Use - for decrease, and NA for not affected. The first event is recorded as an example.
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b. Determine the amount of depreciation expense to be reported on the income statements for the years 2013 through 2017.
c. Determine the book value (cost 2 accumulated depreciation) Track will report on the balance sheets at the end of the years 2013 through 2018.
d. Determine the amount of the gain or loss Track will report on the disposal of the equipment on October 1, 2018.
e. Prepare the journal entry for the disposal of the equipment on October 1,2018.