On October 4, 2015, C and C Sandblasters Company purchased a new machine for $45

Question

On October 4, 2015, C and C Sandblasters Company purchased a new machine for $45,000. It estimated the machine's useful life at 12 years and the residual value at $4,000. On March 25, 2016, another machine was acquired for $70,000. Its useful life was estimated to be 15 years and its residual value $6,000. On May 24, 2017, the first machine was sold for $28,000. The company closes its books on December 31 each year, uses the straight-line method of depreciation, and calculates depreciation to the nearest month.

Required:

Give the necessary journal entries for the years 2015 through 2017 for both machines. Include the depreciation of the second machine on December 31, 2017.

Explanation / Answer

Solution:-

Depreciation for 2015:-

[(45000-4000) / 12]*3/12 = 845

Depreciation for 2016:-

First machine = 3417

New machine = [(70000-6000)15]*9/12 = 3200

Depreciation for 2017:-

First machine = 3417*5/12 = 1424

New machine = 4267

Date Debit Credit 31 Dec 2015 Dep 845 To first machine 845 31 Dec 2016 Dep 3417 To first machine 3417 Dep 3200 To new machine 3200 24 May 2017 Cash 39314 To first machine 39314 31 Dec 2017 Dep 1424 To first machine 1424 Dep 4267 To new machine 4267

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