In: Accounting
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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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 |