Question

Zimmer Company sold the following two machines in 2020:
Machine A Machine B
Cost $76,000 $80,000
Purchase date July 1, 2016 January 1, 2017
Useful life 8 years 5 years
Salvage value $4,000 $4,000
Depreciation method Straight-line Double-declining-balance
Date sold July 1, 2020 August 1, 2020
Sales price $35,000 $16,000
Instructions
1. Pass the necessary journal entries to record purchase of the machine A and
Machine B on 1 July 2016 and 1 January, 2017 respectively.
2. Calculate depreciation of the machine A and machine B for the year 2016, 2017,
2018, 2019. .
3. Journalize all entries required to update depreciation and record the sales of the
two assets in 2020.

Answer 1

1.

Date	General Journal	Debit	Credit
01-07-16	Machine A	76,000
	Cash		76,000
	(being purchase of Machinary for cash)
01-01-17	Machine B	80,000
	Cash		80,000
	(being purchase of Machinary for cash)

2.

Compuation of Depreciation
Particulars	Machine A	Machine B
Purchase Date	01-07-16	01-01-217
Cost Of Machine (a)	76,000	80,000
Salvage Value (b)	4,000	4,000
Useful life (c )	8 Years	5 Years
Depreciation rate (d)	12%	40%
	(((a-b)/c)/a)	((a/c)*2)
Asset Used in 2016 (e)	6 months	-
Depreciaton for 2016 (f)	4,500	-
	(a*d)*e/12	-
Asset used in 2017 (g)	1 Year	1Year
Depreciation for 2017 (h)	9,000	32,000
	(a*d)	(a*d)
Written down value in 2017 (i=a-f-h)	62,500	48,000
Depreciation for 2018 (j)	9,000	19,200
	(a*d)	(i*d)
Written down value in 2018 (k=i-j)	53,500	28,800
Depreciation for 2019 (l)	9,000	11,520
	(a*d)	(k*d)
Written down value in 2019 (m=k-l))	44,500	17,280
Asset used in 2020 (n)	6 months	8 months
Depreciation in 2020 (o)	4,500	6,912
	(a*d)	(m*d)
Written down value on sale date (p=m-o)	40,000	10,368
	(as on July 1 2020)	(as on August 1 2020)
Sale Amount (q)	35,000	16,000
Profit / (Loss) on Sale (r=q-p)	(5,000)	5,632

3.

Date	General Journal	Debit	Credit
01-07-20	Depreciation	4,500
	Machine A		4,500
	(being depreciation booked for till july 2020)
01-07-20	Cash	35,000
	Loss on sale of Fixed Asset	5,000
	Machine A		5,000
	(being sale of Machine A)
01-08-20	Depreciation	6,912
	Machine B		6,912
	(being depreciation booked for till August 2020)
01-08-20	Cash	16,000
	Machine B		10,368
	Profit on Sale of Fixed Asset		5,632
	(being sale of Machine B)

I assumed that Asset shown in balance sheet as written down value instead of showing accumulated depreciation in balance sheet