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Spoiled Baby Corporation sells baby buggies and has started an equipment replacement project. You are required to find out the Book Value of each of its fixed assets and make decisions regarding the purchases, trades and disposition of different assets. 

Point out your recommendation and validate your position for each of the given events.

1) SPC bought a tube extruder on April 3, 2007 for $27,000. It consists of a useful life of 10 years and a residual value of $4,000. SPC used double declining the balance depreciation for this asset. On February 19, 2012 SPC has an offer to sell this unit for 8,000. 

2) SPC purchased a winding machine on July 28, 2012 for $21,000. It consists of a useful life of 6 years or 12,000 hours. It consists of a residual value of $3,000. SPC is unsure whether to use straight line depreciation or units of production. This anticipates by using the equipment around 3000 hours each year. 

3) SPC purchased a funneling machine on the February 9, 2009 for $72,000.  It consists of a useful life of 5-years and a residual value of $12,000. SPC has utilized Straight line depreciation for this equipment. SPC has found out that this equipment no longer meets its requirements and has decided to exchange this unit for a new model. The new Model consists of a MSRP of $100,000. On December 28, 2012 SPC will exchange its equipment for the new Model and pay $77,000. 

4) SPC consists of a fully piece of equipment which is presently completely depreciated on its books. This equipment is no longer used and SPC wants to get rid of it.  The cost of the equipment is $10,000. The company has been offered $300 for its parts.  Describe the journal entry which would record this transaction?

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  • Category:- Accounting Basics
  • Reference No.:- M917650

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