Problem 2 Custom Flags purchased a sewing machine in January 2013 for $6,000. Cu

Question

Problem 2 Custom Flags purchased a sewing machine in January 2013 for $6,000. Custom depreciated the machine using the straight line method with an estimated useful life of 10 years and a residual value of $200. a) Calculate depreciation using the straight line method for 2013, 2014, and 2015. b) Determine book value for the sewing machine as of December 31, 2015. c) Record the journal entry for the sale of the sewing machine on October 1, 2016 for $3,600. d) Record the journal entry for the sale of the sewing machine on October 1, 2016 for $4,000.

Explanation / Answer

Depeciation Under SLM = (Cost -salvage)/life

2013 =(6000-200)/10

       = 5800 /10 = 580

2014= 580

2015= 580

b)Book value = 6000- (580*3 years)]

                 = 6000 - 1740

                 = 4260

c)Depreciation for 2016 till 30sep = 580 * 9/12 = 435

D)

Date Account title Debit credit oct 1 2016 Cash 3600 Loss on sale of machine 225 Accumulated depreciation [580*3]+435 2175 Sewing machine 6000

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