Question

Chris's Lumber Mill sold two pieces of equipment in 2022. The following information pertains to the two pieces of equipment: Useful Life Salvage Value Depreciation Method Machine Sales Price Date Sold Purchase Cost Date $111,800 7/1/18 $123,500 1/1/21 5 yrs $7,800 Straight-line 7/1/22 $6,500 Double-declining-balance 12/31/22 $26,000 $48,100 #2 5yrs Compute the depreciation on each piece of equipment to the date of disposal. Machine #1 Annual Depreciation Accumulated Depreciation Year 2018 $ 2019 2020 2021 2022

Answer 1

SOLUTION : MACHINE 1
	CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD FOR MACHINE
	Purchase Cost of Machine	$                                 1,11,800
	Less: Salvage Value	$                                       7,800
	Net Value for Depreciation	$                                 1,04,000
	Usefule life of the Assets	5 years
	Depreciation per year = Value for Depreciation / 5 years =	$                                    20,800
	Total Depreciation for the per year	$                                    20,800
	Year	Annual Depreciation	Accumulated Depreciation	Book Vale
	Year - 2018 (half year)	$                                    10,400	$                         10,400	$                                  1,01,400
	Year - 2019	$                                    20,800	$                         31,200	$                                      80,600
	Year - 2020	$                                    20,800	$                         52,000	$                                      59,800
	Year - 2021	$                                    20,800	$                         72,800	$                                      39,000
	Year - 2022 (Half Year)	$                                    10,400	$                         83,200	$                                      28,600
SOLUTION : MACHINE 2
	CALCULATION OF THE DEPRECIATION AS PER DOUBLE DECLINE METHOD FOR MACHINE C
	Rate of Depreciation =
	Rate of Depreciation = (1 / 5 Years )	0.20 or 20.0%
	(Depreication / Purchase price )
	Double decline deprection rate = 20 % * 2 =	40.00%
	Depreciation for the year 2018 =	Purchase Value	Depreciation @ 40%	Book Value
	Year 2021	$                                 1,23,500	$                         49,400	$                                      74,100
	Year 2022		$                         29,640	$                                      44,460
	Year	Annual Depreciation	Accumulated Depreciation	Book Vale
	Year - 2021	$                                    49,400	$                         49,400	$                                      74,100
	Year - 2022	$                                    29,640	$                         79,040	$                                      44,460
JOURNAL ENTRY - MACHINE 1
	General Journal	Debit	Credit
	Depreciation Expenses	10,400
	To Accumulated Depreciation - Machine 1		10,400.00
	(To recod the depreciation expenses)
		Debit	Credit
	Accumulated Depreciation - Machine 1	$                                    83,200
	Loss on Sale of Machine 1 ($ $ 28,600- $ 26,000)	$                                       2,600
	Cash	$                                    26,000
	Machine 1		$                      1,11,800
	(To recod the sale of machine 1)
JOURNAL ENTRY - MACHINE 2
	General Journal	Debit	Credit
	Depreciation Expenses	$                                    29,640
	To Accumulated Depreciation - Machine 1		$                         29,640
	(To recod the depreciation expenses)
		Debit	Credit
	Accumulated Depreciation - Machine 1	$                                    79,040
	Cash	$                                    48,100
	Machine 1		$                      1,23,500
	Gain on Sale of Machine 1 ($ 48,100 - $ 44,460)		$                            3,640
	(To recod the sale of machine 1)