A company completed the following transactions involving machinery: Machine No. 366-90 was purchased on May 1, 1986,

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A company completed the following transactions involving machinery: Machine No. 366-90 was purchased on May 1, 1986, at an installed cost of \(\$ 48,600\). Its useful life was estimated at four years with a \(\$ 5,400\) trade-in value. Straight-line depreciation was recorded on the machine at the end of 1986 and 1987, and on August 5, 1988, it was traded for Machine No. 366-91. A \(\$ 27,000\) trade-in allowance was received, and the balance was paid in cash.

Machine No. 366-91 was purchased on August 5, 1988, at an installed cash price of \(\$ 63,000\), less the trade-in allowance received on Machine No. 366-90. The new machine's life was estimated at five years with a \(\$ 6,300\) trade-in value. Sum-of-the-years'-digits depreciation was recorded on each December 31 of its life, and on January 5, 1993, it was sold for \(\$ 9,000\).

Machine No. 367-10 was purchased on January 6, 1988, at an installed cost of \(\$ 45,000\). Its useful life was estimated at five years, after which it would have a \(\$ 4,500\) trade-in value. Declining-balance depreciation at twice the straight-line rate was recorded on the machine at the end of 1988, 1989, and 1990; and on January 3, 1991, it was traded for Machine No. 367-11. An \(\$ 8,100\) trade-in allowance was received, the balance was paid in cash, the loss was considered immaterial, and the income tax method was used to record the transaction.

Machine No. 367-11 was purchased on January 3, 1991, at an installed cash price of \(\$ 53,100\), less the trade-in allowance received on Machine No. 367-10. It was estimated the new machine would produce 75,000 units of product during its useful life, after which it would have a \(\$ 5,400\) trade-in value. Units-of-production depreciation was recorded on the machine for 1991, a period in which it produced 7,500 units of product. Between January 1 and October 3, 1992, the machine produced 11,250 more units, and on the latter date it was sold for \(\$ 36,000\).

\section*{Required}

Prepare general journal entries to record:

(a) the purchase of each machine,

(b) the depreciation recorded on the first December 31 of each machine's life, and

(c) the disposal of each machine. Treat the entries for the first two machines as one series of transactions and those of the next two machines as an unrelated second series. Only one entry is needed to record the exchange of one machine for another.

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Financial Accounting

ISBN: 9780256091939

5th Edition

Authors: Kermit D. Larson, Paul B. W. Miller

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