Cadillac Construction Company uses the retirement method to determine depreciation on its small tools. During 2016, the first year of the companys operations, tools were purchased at a cost of $12,000. In 2018, tools originally costing $4,600 were sold for $900 and replaced with new tools costing $5,300.

1. Prepare journal entries to record each of the above transactions.

Record the purchase of small tools for $12,000 in cash using the retirement depreciation method.

Record the purchase of additional small tools for $5,300 in cash using the retirement depreciation method.

Record the sale for $900 of tools that cost $4,600 using the retirement depreciation method.

2. Prepare journal entries to record each of the above transactions, assuming that the company uses the replacement depreciation method instead of the retirement method.

Record the purchase of small tools for $12,000 in cash using the replacement depreciation method.

Record the purchase of additional small tools for $5,300 in cash using the replacement depreciation method.

Record the sale for $900 of tools that cost $4,600 using the replacement depreciation method.