Rayya Co. purchases a machine for $105,000 on January 1, 2021. Straight-line depreciation is taken each year
Question:
Rayya Co. purchases a machine for $105,000 on January 1, 2021. Straight-line depreciation is taken each year for four years assuming a seven-year life and no salvage value. The machine is sold on July 1, 2025, during its fifth year of service. Prepare entries to record the partial year’s depreciation on July 1, 2025, and to record the sale under each separate situation.
1. The machine is sold for $45,500 cash.
2. The machine is sold for $25,000 cash.
Step by Step Answer:
Answer Entry to record the partial years depreciation on July 1 2023 Debit Depreciation Expense 7500 ...View the full answer
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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