Question
ABC Corporation acquired in 1/1/2010 a second-hand piece of machinery by HZ Corporation in cash. In the records of the HZ Corporation the book value
ABC Corporation acquired in 1/1/2010 a second-hand piece of machinery by HZ Corporation in cash. In the records of the HZ Corporation the book value of the machinery at the date of the sale was 15,000. The invoice price of the machinery was 14,000, while the HZ corporation offered a cash discount of 1,000. In addition the HZ Corporation paid 150 and 470 for transportation expenses and installation costs respectively. The piece of machinery was ready for its intended use on 1/1/2010. According to its technical specification the machinery would have been fit for use for 20 years. The management of ABC corporation intended to use the machinery until 31/12/2019. The residual value of the machinery was estimated to 1,200. In 1/1/2018 a major overhaul of the machinery took place. As a consequence of the overhaul the production capacity of the machinery increased and the management of ABC decided that the machinery would have been used until 31/12/2022 when the residual value of the machinery was estimated to be insignificant. The cost of the overhaul was 1,500. In 1/1/2020 the machinery suffered a major break-down and the management of ABC decided to retire the particular machinery at the same date. ABC Corporation employed the straight-line method for the calculation of the annual depreciation charges. The firms accounting period commences at 1st January and ends at 31st December of each year.
Determine the accounting entry that ABC should make in order to record the depreciation charge for fiscal period 2018.
Determine the accounting entry that ABC should make in order to record the retirement of the machinery in 1/1/2020.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started