Problem 1 Red Brick Company purchased a front-end loader and tractor for $44,000
ID: 2472014 • Letter: P
Question
Problem 1
Red Brick Company purchased a front-end loader and tractor for $44,000 on October 1, 2010. The tractor has an estimated useful life of six years or 25,800 hours and a residual value of $2,000. Listed in the chart below is the number of hours the tractor and front-end loader were used during 2011 through 2017.
Year # of hours used
2010 2,600
2011 4,200
2012 3,900
2013 4,150
2014 4,300
2015 4,000
2016 3,100
a) Calculate depreciation using the straight line method for 2010 through 2016.
b) Calculate depreciation using units of production method for 2010 through 2016.
c) Calculate depreciation using declining balance method for 2010 through 2016.
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
Prob1(a) Calculation of depreciation using SLM 44000-2000/6 7000 b) Calculation of Depreciation using Unit of production method Depn Per unit=cost of asset-Scrap Value/Total estimate unit of output 44000-2000/25800 1.6279 Per unit Prob2(a) Depreciation=6000-200/10 580 B Book Value Cost of Purchase 6000 Dep (580*3) 1740 Value 4260 C Journal Entry Bank a/c Dr' 3600 Loss on sale Dr 273 to Machine *3873 *4260-8 month dep d Bank a/c Dr' 4000 to Profit on sale 127 to Machine 3873
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