The Opening Balance in the Computer Account for Adara Corp

question 38

Essay

The opening balance in the computer account for Adara Corp for fiscal 2017 was $100,000; the closing balance was $107,000.The corresponding balances in the accumulated depreciation accounts were $63,000 and $67,500.During the year Adara scrapped a computer originally costing $13,000 having a remaining net book value of $3,500 and purchased a replacement machine for cash.
Requirements:
a.Prepare the underlying journal entries to record the foregoing transactions and record events stemming from the transactions (e.g.,the accrual of interest at year-end).
b.For each entry identify the cash flow effects,if any,under both the direct and indirect methods of presentation and classify the cash flow according to its nature.

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Definitions:

Gain Reported

The difference reported in financial statements when the sale price of an asset exceeds its book value.

Carrying Amount

The book value of an asset or liability on a company's balance sheet, calculated as its original cost minus depreciation, amortization, or impairment costs.

Disposal of an Asset

The process of selling, scrapping, or otherwise removing an asset from the company's balance sheet due to its disposal, sale, or obsolescence.

Depreciation Recorded

The process of allocating the cost of a tangible asset over its useful life to account for the loss of value over time.