P9-3A Pine Company – Asset Retirement of Machinery, Forklift, and Truck

P9-3A Pine Company

In this tutorial, we will look asset retirement journal entries for Machinery, Forklift, and Truck at Pine company. It is necessary to record depreciation, as well as capital gains and losses on the retirement of the assets.

  • Student: Tyler Muffty
  • Textbook: Principles of Accounting II
  • Course: Accounting Week 3

Pine Company had the following assets on January 1, 2017. During 2017, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $12,000. The truck was discarded on December 31.

Item Cost Purchase Date Useful Life Salvage Value
Machinery 71000 1/1/2007 10 0
Forklift 30000 1/1/2014 5 0
Truck 33400 1/1/2012 8 3000

Machinery Retirement

This asset has been fully utilized, so we only need to worry about accumulated depreciation and closing out machinery.

Account Debit Credit
Accumulated depreciation 71000
Machinery 71000

Forklift Retirement

First, figure out how much time has elapsed, in this case 3.5 years. Next, calculate depreciation for 6 months, then close out the account with a gain or loss.

Sale Price 12,000
Sale Date 6/30/2017
Total Depreciation                 21,000
Account Debit Credit
Depreciation Expense 3000
Accumulated Depreciation 3000
Cash 12,000
Accumulated Depreciation 21000
Gain on Disposal 3000
Forklift (Vehicles) 30000

Truck Retirement

We know the truck was disposed with a loss, so we just need to record the annual depreciation, then close the account with a loss.

Loss on Disposal: 10600
Sale Date 1/1/2017
Depreciation Expense 3800
Accumulated Depreciation 3800
Accumulated Depreciation 19,000
Loss on Retirement 10600
Delivery Truck (Vehicles) 29600

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