Question

Zephyr Minerals completed the following transactions involving machinery.

     Machine No. 1550 was purchased for cash on April 1, 2017, at an installed cost of $83,000. Its useful life was estimated to be six years with a $14,000 trade-in value. Straight-line depreciation was recorded for the machine at the ends of 2017, 2018, and 2019. On March 29, 2020, it was traded for Machine No. 1795, with an installed cash price of $77,000. A trade-in allowance of $31,710 was received for Machine No. 1550, and the balance was paid in cash. The fair values of Machine No. 1550 and Machine No. 1795 could not be determined.

     Machine No. 1795’s life was predicted to be four years with a trade-in value of $9,700. Double declining-balance depreciation on this machine was recorded each December 31. On October 2, 2021, it was traded for Machine No. BT-311, which had an installed cash price of $642,000, the machine’s fair value. A trade-in allowance of $10,000 was received for Machine No. 1795, and the balance was paid in cash.

     It was estimated that Machine No. BT-311 would produce 200,000 units of product during its five year useful life, after which it would have a $20,000 trade-in value. Units-of-production depreciation was recorded for the machine for 2021, a period in which it produced 39,000 units of product. Between January 1, 2022, and August 21, 2024, the machine produced 114,000 more units. On August 21, 2024, it was sold for $82,700.

Required:
Prepare journal entries to record: (Round intermediate calculations to the nearest whole dollar.)

a. The depreciation expense recorded to the nearest whole month on the first December 31 of each machine’s life. (Round the final answers to the nearest whole dollar. If no entry is required for a transaction, select "No journal entry required" in the first account field.)

1. Record Depreciation For Machine 1550

2. Record Depreciation For Machine 1795

3. Record Depreciation For Machine BT-311

b. The purchase/exchange/disposal of each machine. (Round the final answers to the nearest whole dollar. If no entry is required for a transaction, select "No journal entry required" in the first account field.)

1. Record Purchase of Machine 1550

2. Record Exchange of Machine 1550

3. Record Exchange of Machine 1795

4. Record Sale of Machine BT- 311

Answer 1

Part A

Date	Account titles and explanation	Debit	Credit
Dec. 31, 2017	Depreciation expense – machine 1550	8625
	Accumulated depreciation – machine 1550		8625
	(to record depreciation)
Dec. 31, 2020	Depreciation expense – machine 1795	35171
	Accumulated depreciation – machine 1795		35171
	(to record depreciation)
Dec. 31, 2021	Depreciation expense – machine BT-311	121290
	Accumulated depreciation – machine BT-311		121290
	(to record depreciation)

Part B

Date	Account titles and explanation	Debit	Credit
Apr. 31, 2017	machine 1550	83000
	Cash		83000
	(to record purchase of Machine 1550)
Mar. 29, 2020	Machine 1795	93790
	Accumulated depreciation - machine 1550	34500
	machine 1550		83000
	Cash		45290
	(To record exchange of Machine 1550)
Oct. 2, 2021	Machine BT-311	642000
	Accumulated depreciation - machine 1795	57153
	Loss on Disposal	26637
	machine 1795		93790
	Cash (642000-10000)		632000
	(To record exchange of Machine 1795)
Aug. 21, 2024	Cash	82700
	Accumulated depreciation – machine BT-311	475830
	Loss on Disposal	83470
	Machine BT-311		642000
	(to record sale of Machine BT-311)

Depreciation expense Dec. 31, 2017 = ((83000-14000)/6*9/12)= 8625

2017	8625
2018	11500
2019	11500
2020 (((83000-14000)/6*3/12)	2875
Accumulated depreciation	34500

Book value = 83000-34500 = 48500

Cash paid = 77000-31710 = 45290

Book value + cash paid = 48500+45290 = 93790

Depreciation Dec. 31, 2020 = 93790*2/4*9/12 =35171

2021 (93790-35171)*2/4*9/12	21982
2020	35171
Accumulated depreciation	57153

Depreciation Dec. 2021 = (642000-20000)/200000 = $3.11 per unit *39000 = $121290

2022-aug. 2024 (3.11*114000)	354540
2021	121290
Accumulated depreciation	475830