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 $88,000. Its useful life was estimated to be six years with a $7,000 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 $82,000. A trade-in allowance of $32,210 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 $10,200. 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 $742,000, 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 44,000 units of product. Between January 1, 2022, and August 21, 2024, the machine produced 119,000 more units. On August 21, 2024, it was sold for $83,200. Required: Prepare journal entries 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

Answer 1

Part A

Date	Account titles and explanation	Debit	Credit
Dec. 31, 2017	Depreciation expense – machine 1550	10125
	Accumulated depreciation – machine 1550		10125
	(to record depreciation)
Dec. 31, 2020	Depreciation expense – machine 1795	36483
	Accumulated depreciation – machine 1795		36483
	(to record depreciation)
Dec. 31, 2021	Depreciation expense – machine BT-311	158840
	Accumulated depreciation – machine BT-311		158840
	(to record depreciation)

Part B

Date	Account titles and explanation	Debit	Credit
Apr. 31, 2017	machine 1550	88000
	Cash		88000
	(to record purchase of Machine 1550)
Mar. 29, 2020	Machine 1795	97290
	Accumulated depreciation - machine 1550	40500
	machine 1550		88000
	Cash		49790
	(To record exchange of Machine 1550)
Oct. 2, 2021	Machine BT-311	742000
	Accumulated depreciation - machine 1795	59286
	Loss on Disposal (balancing figure)	28004
	machine 1795		97290
	Cash (742000-10000)		732000
	(To record exchange of Machine 1795)
Aug. 21, 2024	Cash	83200
	Accumulated depreciation – machine BT-311	588430
	Loss on Disposal (balancing figure)	70370
	Machine BT-311		742000
	(to record sale of Machine BT-311)

Depreciation expense Dec. 31, 2017 = ((88000-7000)/6*9/12)= 10125

2017	10125
2018	13500
2019	13500
2020 (((83000-14000)/6*3/12)	3375
Accumulated depreciation	40500

Book value = 88000-40500 = 47500

Cash paid = 82000-32210 = 49790

Book value + cash paid = 47500+49790 = 97290

Depreciation Dec. 31, 2020 = 97290*2/4*9/12 =36483

2021 (97290-36483)*2/4*9/12	22803
2020	36483
Accumulated depreciation	59286

Depreciation Dec. 2021 = (742000-20000)/200000 = $3.61 per unit *44000 = $158840

2022-aug. 2024 (3.61*119000)	429590
2021	155840
Accumulated depreciation	588430