Question

Mister Macchiato purchased a coffee drink machine on January? 1, 2016 for $ 38,000. Expected useful life is 10 years or 50,000 drinks. In 2016?, 10,000 drinks were? sold, and in 2017, 20,000 drinks were sold. Residual value is $3,000.

b. Assume that Mister Macchiato sold the equipment for $23,000 cash on July? 1, 2018. Assume that management has depreciated the equipment by using the? double-declining-balance method. Record Mister Macchiato?'s depreciation for 2018 and the sale of the equipment on July? 1, 2018.

Answer 1

Depreciation under DDB Method
Year - a	Net Book value, beginning of year - b	Double declained depreciation - c = b/Life of assets*2	Accumulated depreciation	Net book value, End of the year - d = b-c
2016	$    38,000	$                                             7,600	$      7,600	$ 30,400
2017	$    30,400	$                                             6,080	$    13,680	$ 24,320
2018	$    24,320	$24,320/10*2*6/12 = $2,432	$    16,112	$ 21,888

Depreciation for the year upto sale =$2,432

Journal entries

Depreciation expense	$    2,432
Accumulated deprecition		$    2,432
(To record depreciation expense upto July1)
Cash	23000
Accumulated depreciation	$ 16,112
Machine		$ 38,000
Gain on sale of assets		$    1,112