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NEED AN ANSWER ASAP PLEASE Eire Company purchases equipment on May 1 st , 2017. The equipment had a cost from the manufacturer of $125,000,
NEED AN ANSWER ASAP PLEASE
Eire Company purchases equipment on May 1st, 2017. The equipment had a cost from the manufacturer of $125,000, $11,000 was spent on transportation and installation, and $2,000 was spent in each of 2017, 2018 and 2019 on routine maintenance. The equipment has an estimated useful life of 10 years, and an estimated residual value of $10,000. The company uses straight-line depreciation, and has a December 31st fiscal year-end.
REQUIRED:
- Explain what costs should be capitalized relating to this equipment and why. What will be done with costs that are not capitalized?
- Calculate depreciation for each of 2017 and 2018, show your work.
- On June 30, 2019 the equipment is sold for $25,000 cash. Provide the journal entry at the time of the sale. Show any supporting calculations.
- Early in 2019 changes in technology had meant the equipment was obsolete. The factory manager argued the equipment should not be sold to avoid recognizing an accounting loss. He wanted to leave the equipment in a corner of the warehouse and continue depreciation. Provide and explain two reasons why the factory managers argument is not appropriate.
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