Question

Assume X corp purchased a new machine on 3/1/19. The purchase price was $225,000. In addition, X corp paid $10000 for shipping and taxes, and 15,000 for installation. The machine's estimated useful life is 4 years, estimated salvage value is 20%. They use straight-line depreciation and they are a calendar year-end.

Required:

A) calculate and account for depreciation expense,using a journal entries, throughout the life of the asset.

B) show the asset's Net Book value throughout the life of the asset.

Problem #2

Based on the information in #1 above:

Assume X corp sold the machine on 9/30/21 for $150,000

Required:

A) show your calculation for Gain or Loss on the asset sale.

B) make the Journal Entry to record the sale of the asset.

Answer 1

Question 1

Given That:

Cost of Assets = $225.000 + $10,000 + $15,000 = $250,000

Salavage Value = $250,000*20% = 50,00

Date of Purchase Asset = 1/3/19 = 10 Months

A)Depreciation P.A = ( Cost of Assets - Salvage Value)/ Estimated useful life

= ($250,000 - $50,000) / 4 Years

= $200,000/4

= $50,000

So Depreciation for 10 months from (1/3/19 to 31/12/19) = $50,000*10/12 = $41,667

B) Book value throughout life of assets is as follows:

Years	Depreciation Expenses	Net Book Value
2019(10 Months)	$41,667	$208,333
2020	$50,000	$158,333
2021	$50,000	$108,333
2022	$50,000	$58,333

Question 2

A)Gain or loss is calculated below:

Years	Depreciation Expenses	Net Book Value
2019(10 Months)	$41,667	$208,333
2020	$50,000	$158,333
Till 9/30/2021 (9 Months)	$37,500	$120,833
	Asset Sold	$150,000
	Gain on Sale of Assets	$29,167

B) Journal entry for sale of assets

Date	Account and Explanation	Debit($)	Credit($)
9/30/2021	Cash	150,000
	Accumulated Depreciation	129,167
	To Machinery		250,000
	To Gain on Sale of Machinery		29,167
	(Recorded the entry for the sale of assets)