Question

In: Accounting

On January 1, 2010, the Felix Company purchased a machine to use in the manufacture of...

On January 1, 2010, the Felix Company purchased a machine to use in the manufacture of its product. The invoice cost of the machine was $260,000. At the time of acquisition, the machine had an original estimated useful life of 10 years and an estimated salvage value of $20,000. Annual depreciation was recorded at $24,000 per year. The machine was depreciated using the straight-line method. On August 1, 2015, Felix exchanged the old machine for a newer model. The new machine had a fair market value of $200,000. The estimated fair value of the old machine was $150,000. Felix also paid $50,000 as part of the exchange transaction. The old machine was depreciated on Felix’s books up through December 31, 2014.

  1. Bring Felix’s depreciation on this machine up to date through the date of the exchange.

Solutions

Expert Solution

Given Information

Cost of Machinery = $ 260000

Estimated Life = 10 Yrs

Estimated salvage Value = $ 20000

Depreciation on straight line method

Annual Depreciation provided = $ 24000

Calculation of Depreciation Upto Dec 31, 2014

No of years from 1st Jan 2010 to 31st Dec 2014 = 4 yrs

Depreciation for 4 yrs = 24000 * 5 = $ 96000

Value of Machinery as on 31st Dec 2014 = $ 260000 - $ 120000

= $ 140000

Depreciation for 7 months in the year 2015 (i.e Upto the date of exchange ) = (24000/12)*7

= 14000

Book Value of Machinery on 1st August 2015 = (140000- 14000) = $ 126000

Depreciation Schedule upto 1st Aug 2015

Year   Openning Balance Depreciation Provided   Closing Balance
2010       2,60,000           24,000     2,36,000
2011       2,36,000           24,000     2,12,000
2012       2,12,000           24,000     1,88,000
2013       1,88,000           24,000     1,64,000
2014       1,64,000           24,000     1,40,000
31-07-2015       1,40,000           14,000     1,26,000
     
  

Total Accumulated Depreciation = $ 134000

Estimated Fair Value on 1st Aug 2015 = $150000

Fair Market Value of New machinery =$ 200000

Accounting Entry for exchange of asset transaction

1st Aug 2015 Accumulated Depreciation A/c Dr. $ 134000

New Machinery A/c Dr. $ 200000

To old Machinery A/c $ 260000

To Gain A/c $ 24000

To Cash A/c $50000

( To remove all accounts relate to old machinery and cash, Set up the new machinery value at its fair value

and recording the gain in exchange)

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

On January 1, 2010, the Felix Company purchased a machine to use in the manufacture of...
On January 1, 2010, the Felix Company purchased a machine to use in the manufacture of its product. The invoice cost of the machine was $260,000. At the time of acquisition, the machine had an original estimated useful life of 10 years and an estimated salvage value of $20,000. Annual depreciation was recorded at $24,000 per year. The machine was depreciated using the straight-line method. On August 1, 2015, Felix exchanged the old machine for a newer model. The new...
On January 2, 2010, Sayre Company purchased a machine for $45,000. The machine has a five-year...
On January 2, 2010, Sayre Company purchased a machine for $45,000. The machine has a five-year estimated useful life and a $5,000 estimated residual value. In addition, the company expects to use the machine 250,000 hours. Assuming that the machine was used 40,000 and 45,000 hours during 2010 and 2011, respectively, complete the following chart. Depreciation Expense 1st Year Depreciation Expense 2nd Year Accumulated Depreciation Net Book Value Straight-Line     Method Declining Balance Method
Paper Printing Company purchased a copy machine for $ 65 comma 000$65,000 on January​ 1, 2010....
Paper Printing Company purchased a copy machine for $ 65 comma 000$65,000 on January​ 1, 2010. The copy machine had an estimated useful life of five years or 1 comma 000 comma 0001,000,000 copies. Paper Printing estimated the copy​ machine's salvage value to be $ 5 comma 000$5,000. The company made   250 comma 000250,000 copies in 2010 and 190 comma 000190,000 copies in 2011.Requirements LOADING... 1. Calculate the depreciation expense for each year using the straight line method. - =...
SBS Company purchased a new machine on January 1, at a cost of $420,000. The machine...
SBS Company purchased a new machine on January 1, at a cost of $420,000. The machine has an expected useful life of four years and an expected salvage value of $40,000. The company expects to use the machine for 1,300 hours in the first year, 1,900 hours in the second year, and 900 hours in the third and fourth year, respectively. (a) Calculate Depreciation Expenses for each year using Straight-Line Method Year Depreciation Expenses 1 $ 2 $ 3 $...
Adelphi Company purchased a machine on January 1, 2017, for $90,000. The machine was estimated to...
Adelphi Company purchased a machine on January 1, 2017, for $90,000. The machine was estimated to have a service life of ten years with an estimated residual value of $5,000. Adelphi sold the machine on January 1, 2021 for $30,000. Adelphi uses the double declining method for depreciation. Using this information, how much is the gain or (loss) for the equipment sale entry made on January 1, 2021. Enter a loss as a negative number.
On January 1, 2017, Beard Company purchased a machine for $800,000. The machine is expected to...
On January 1, 2017, Beard Company purchased a machine for $800,000. The machine is expected to have a 10-year life and no residual value. On January 1, 2017, it leased the machine to Ajax Company for a three-year period at an annual rental of $200,000 to be paid at the end of each year. The lease has an implicit interest rate of 8%. Ajax has adopted early the provisions of ASC 842 on January 1, 2017. What's the initial value...
Adelphi Company purchased a machine on January 1, 2017, for $50,000. The machine was estimated to...
Adelphi Company purchased a machine on January 1, 2017, for $50,000. The machine was estimated to have a service life of ten years with an estimated residual value of $5,000. Adelphi sold the machine on January 1, 2021 for $24,000. Adelphi uses the double declining method for depreciation. Using this information, how much is the gain or (loss) for the equipment sale entry made on January 1, 2021. Enter a loss as a negative number.
Adelphi Company purchased a machine on January 1, 2017, for $70,000. The machine was estimated to...
Adelphi Company purchased a machine on January 1, 2017, for $70,000. The machine was estimated to have a service life of ten years with an estimated residual value of $5,000. Adelphi sold the machine on January 1, 2021 for $28,000. Adelphi uses the double declining method for depreciation. Using this information, how much is the gain or (loss) for the equipment sale entry made on January 1, 2021. Enter a loss as a negative number.
Adelphi Company purchased a machine on January 1, 2017, for $50,000. The machine was estimated to...
Adelphi Company purchased a machine on January 1, 2017, for $50,000. The machine was estimated to have a service life of ten years with an estimated residual value of $5,000. Adelphi sold the machine on January 1, 2021 for $27,000. Adelphi uses the double declining method for depreciation. Using this information, how much is the gain or (loss) for the equipment sale entry made on January 1, 2021. Enter a loss as a negative number.
On January 1, 2010, Paprika Company Purchased 90% of the outstanding common stock of sage company...
On January 1, 2010, Paprika Company Purchased 90% of the outstanding common stock of sage company by issuing 30,000 shares of its $10 par ($60 market value) common stock $ 150,000 other contributed capital, $1,060,000; and retained earnings, $120,000. Paprika company paid more than the book value of the net assets because of the recorded cost of sage company’s land was signed less than its fair value (which accounts for the entire difference) During 2010 Sage Company Lost 100000 and...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT