Question

А 6 Problem 9-18B Partial year's depreciation; alternative methods; exchange/disposal of PPE 102,03,06 CHECK FIGURES: 1. Machine 6690 = $10,800, Machine 6691 = $8.325: Machine 6711 = $7155 Vidéotron Ltée completed the following transactions involving printing equipment. Machine 6690 was purchased for cash on May 1, 2020, at an installed cost of $72.900. Its useful life was estimated to be four years with an $8.100 trade-in value. Straight-line depreciation was recorded for the machine at the end of 2020 and 2021. On August 5, 2022. it was traded for Machine 6691, which had an installed cash price of $54,000. A trade in allowance of $10,500 was received and the balance was paid in cash. The new machine's life was estimated at five years with a $9.450 trade in value. The fair values of Machines 6690 and 6691 were not reliably determined at the time of the exchange. Double declining balance depreciation was recorded on each December 31 of Machine 6691's life. On February 1, 2025. it was sold for $13.500. Machine 6711 was purchased on February 1, 2025, at an installed cash price of $79,650. It was estimated that the new machine would produce 75.000 units during its useful life. after which it would have an $8,100 trade in value. Units of production depreciation was recorded on the machine for 2025. a period in which it produced 7,500 units of product. Between January 1 and October 3, 2026, the Page 688 machine produced 11.250 more units. On October 3, 2026. it was sold for $54.000. Required Prepare journal entries to record: 1. The depreciation expense recorded to the nearest whole month on the first December 31 of each machine's life (for units of production, round the rate per unit to three decimal places) 2. The purchase/exchange/disposal of each machine

Answer 1

Machine 6690
Cost	72900
Useful life	4 years
Salvage value	8100
Depreciation method	Straight line
Depreciation for the year	=(Cost-Salvage value)/useful life
	=(72900-8100)/4
	=64800/4
	16200

WDV calculation
Cost	72900
Dpreciation from may to december 2020	10800
Opening value 2021	62100
Depreciation for 2021	16200
opening value 2022	45900
Depreciation from Jan to Aug 2022	9630
Value as on 5th	36270
Sale	40500
Gain on sale	4230

Depreciation calculation
Depreciation for the year	16200
Depreciation per month	1350
Depreciation for a day	45
Depreciation 2020
For May to Dec (8 months)	=1350*8
	10800
Depreciation for 2021	16200
Depreciation for 2022
From Jan to July (7 months)	=1350*7
	9450
From 1st to 4th August ( 4 days)	=45*4
	180
	9630
Total depreciation	36630

Machin 6694

Cost	54000
Useful life	5 years
Salvage value	9450
Depreciation method	Double declining balance
Depreciation rate	=2 * straight line method rate
	=2*(100/5)
	=2*20
	40

WDV calculation
Cost	54000
Depreciation for 2022	8760
opening value 2023	45240
Depreciation for 2023	21600
opening value 2024	23640
Depreciation for 2024	21600
opening value 2025	2040
depreication for 2025	1800
Value on feb 1 2025	240
Sale	13500
Gain on sale	13260

Depreciation calculation
Depreciation for the year	=depreciation rate * book value
	=40% *54000
	21600
Depreciation for the month	1800
Depreciation for the day	60
Depreciation for 2023
Depreication from 5th to 30th august (26 days)	=60*26
	1560
Depreciation from Sept to dec (4 months)	=1800*4
	7200
	8760
Depreciation for 2025
Depreciation for Jan	1800

Machine 6711

Cost	79650
Useful life
Salvage value	8100
Depreciation method	Units of production
Estimated units producted	75000
units in 2025	7500
Units for 2026	11250
Depreciation	=(cost-salvage value)/estimated units to be produced
	=(79650-8100)/75000
	0.954

WDV calculation
Cost	79650
Depreciation for 2025	7155
Opening WDV 2026	72495
Depreciation for 2026	10732.5
WDV Oct 3,2026	61762.5
Sale value	54000
Loss on sale	7762.5

Depreciation calculation
For 2025
Units produced	7500
Depreciation	= rate*units produced
	=0.954*7500
	7155
For 2026
Units produced	11250
Depreciation	= rate*units produced
	=0.954*11250
	10732.5

Journal entries

		Debit	Credit
01-05-2020	Machine 6690	72900
	TO Cash		72900
	(purchase of machine)
31-12-2020	Depreciation expense	10800
	To accumulated depreication-Machine 6690		10800
31-12-2021	Depreciation expense	16200
	To accumulated depreication-Machine 6690		16200
04-08-2022	Depreciation expense	9630
	To accumulated depreication-Machine 6690		9630
05-08-2022	Machine 6691	54000
	accumulated depreication-Machine 6690	36630
	To Gain on sale of machine		4230
	To Cash		13500
	To Machine 6690		72900
31-12-2022	Depreciation expense	8760
	To accumulated depreication-Machine 6691		8760
31-12-2023	Depreciation expense	21600
	To accumulated depreication-Machine 6691		21600
31-12-2024	Depreciation expense	21600
	To accumulated depreication-Machine 6691		21600
31-01-2025	Depreciation expense	1800
	To accumulated depreication-Machine 6691		1800
01-02-2025	Cash	13500
	accumulated depreication-Machine 6691	53760
	To Gain on sale of machine		13260
	To Machine 6691		54000
01-02-2025	Machine 6711	79650
	To cash		79650
31-12-2025	Depreciation expense	7155
	To accumulated depreication-Machine 6711		7155
03-10-2026	Depreciation expense	10732.5
	To accumulated depreication-Machine 6711		10732.5
03-10-2026	Cash	54000
	Loss on sale of machine	7762.5
	accumulated depreication-Machine 6711	17887.5
	To Machine 6711		79650