4. (4 points) Problem #4 - On 4/1/X1, James Jones, Inc. purchased production mac

Question

4. (4 points) Problem #4 - On 4/1/X1, James Jones, Inc. purchased production machinery costing $320,000. Because of recent innovations, the machinery has an estimated useful life of only 3 years. It has a salvage value of $20,000. For each of the depreciation methods given below, complete the depreciation tables. Round annual depreciation numbers to the nearest dollar.

METHOD 1: STRAIGHT LINE
YEAR Annual Depreciation Accumulated Depreciation Year-end
Book Value
-0- -0- 320,000
20X1 75000 75000 245000
20X2 100000 175000 145000
20X3 100000 275000 45000
20X4 25000 300000 20000


METHOD 2: DOUBLE DECLINING BALANCE (Round DDR to nearest .1%)
YEAR Annual Depreciation Accumulated Depreciation Year-end
Book Value
-0- -0- 320,000
20X1 160000 160000 160000
20X2 106,667 266,667 53,333
20X3 33,333 300,000 20,000
20X4 0 0 20,000


5. (2 points) Consider the information in problem #4. Now assume that on 12/31/X3, the firm sells the machinery for $50,000. Assume the firm was using the straight-line method and prepare the journal entry recording the sale for cash.
General Journal
Date Description Debit Credit

Explanation / Answer

Debit: Accumulated depreciation 275,000
Debit: Cash 50,000
Credit: Machine 320,000
Credit: Gain on sale 5,000

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