Question

Problem 2
Gwynedd Valley Farms purchased a new tractor for $30,000. They estimated the tractor would have a useful life of 5 years and would have a salvage value of $5,000. Gwynedd Valley uses the straight line method and the half year convention. Gwynedd Valley sold the tractor during year 3 for $18,000.
Required:

1. Compute the amount of depreciation expense to be taken in Years, 1, 2 and 3.

   Year 1____________ Year 2____________ Year 3____________

2. Prepare the journal entry to record the sale of the tractor in year 3. (Note: tractors are recorded in the “Vehicles” account).

Problem 3
Harcourt Industries purchased an assembly machine at a cost of $20,000. After they had used the machine for three years an had taken a total of $12,000 of depreciation on the machine, they traded in the machine for a new machine costing $25,000. The dealership gave them a trade-in allowance of $10,000 for the old machine. Prepare the journal entry to record the trade-in of the old machine for the new one. (The assembly machine is properly recorded in the “Machinery” account)

Answer 1

page:oi Inswer o compute the amount od depreciation expense to be taken in years ? and 3 computation of annual depreciation (i) cost $ 30000 (i) Salvage value. $5000 Ti - (i)-Gi) depreciable cost = 25000 ( 30000 - 5000) Useful life = 5 Vo viliv Annual depreciation - 35000/5 = 5000 Amount 5000/2 using convention >> half year . we bure << since = 2500 5000 year I year a year 3 5000 cost (0) 2) porepare the journal entry to record the sale of the trantor en year? 130000 (ii) Total deprecation 412500 ii - i - ji written down value = #17500 liv) $18000 Ve iv - profit $ 500 sales price on sale journal entry Account Debit coll credito) cash 18000 500 poofit on sale troutor (7500