On July 1, 2012, Steelman Company acquired a new machine for $172,000 and estima

Question

On July 1, 2012, Steelman Company acquired a new machine for $172,000 and estimated it would have a useful life of 10 years and residual value of $9,500. At the beginning of 2015, the company decided that the machine would be used for nine more years (including all of 2015), and at the end of this time its residual value would be only $1,100. On November 1, 2016, the machine was sold for $82,000. The company uses the straight-line method of depreciation and closes its books on December 31. Give the necessary journal entries for the acquisition, depreciation, and disposal of this asset for the years 2012, 2015, and 2016.

Explanation / Answer

July 1 2012,

Machine A/c debit 172,000

To cash 172,000

Journal entry to record depreciation

Depreciation expense debit 8125

to accumulated depreciation 8125

( Depreciation for 6 months)

31 dec 2013

Depreciation expense 16250

to accumulated depreciation 16250

same for 2014 and 2015

Cash account debit 82,000

loss on disposal debit 19584

accumulated depreciation 70,416

to fixed assets 172,000

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