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A machine acquired on January 4, 2009, at a cost of $425,000, has an estimated useful...

A machine acquired on January 4, 2009, at a cost of $425,000, has an estimated useful life of nine years and an estimated residual value of $65,000. (10 points)

What was the amount of depreciation for the years 2009, 2010, and 2011, using the straight-line method of depreciation?

What was the book value of the machine on January 1, 2012?

                     

Assume that the machine was sold on January 9, 2012, for $290,000 journalize the entry to record the sale                                                               

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Assume that the machine had been sold on January 9, for $310,000, journalize the entry to record the sale.

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Solutions

Expert Solution

Annual depreciation of machine using straight line method
Purchase cost of Machine 425,000
Life of Machine 9 Years
Residual value 65,000
Annual depreciation for the years 2009, 2010 and 2011, using straight line method
= (Purchase cost - residual value)/ life of machine
= (425,000-65,000)/9
= $40,000
Book value of machine on January 1, 2012
   = $425,000- ($40,000*3) = $305,000
Journal entry for sale of machinery on January 9, 2012 for $290,000
Debit Credit
Cash $290,000
Loss on sale of machinery 15,000
Accumulation depreciation on Machinery 120,000
Machinery 425,000
Journal entry for sale of machinery on January 9, 2012 for $310,000
Debit Credit
Cash $310,000
Accumulation depreciation on Machinery 120,000
Profit on sale of machinery 5,000
Machinery 425,000

ekkarill92 answered 3 years ago
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