Question
Part A) Jimmy Motels Inc. owns a motel that it had purchased on January 1, 2023, for $1.5 million cash and is accounted for in
Part A)
Jimmy Motels Inc. owns a motel that it had purchased on January 1, 2023, for $1.5 million cash and is accounted for in a separate account, classified as "Buildings." The company is using the revaluation model to account for its structures and revalues them annually. Jimmy Motels Inc. uses straightline depreciation over the asset's 15-year useful life with no residual value. The asset's fair value was equal to its carrying amount on Dec. 31, 2023, and was $1,450,000 on Dec. 31, 2024.
Required: Assuming Jimmy Motels Inc. uses the asset adjustment (elimination) method for revaluation, prepare all required journal entries for 2023 and 2024.
Part B)
Required: Answer each of the following independent scenarios.
1. On January 2, 2022, a machine was purchased for $180,000. It has an estimated useful life of ten years and an estimated residual value of $14,000. Depreciation for 2023, using the double-declining-balance method, is $______.
2. A vehicle purchased for $50,000 has an estimated useful life of five years and a residual value of $3,800. It is expected to be driven 210,000 kilometres over its useful life. The asset was driven 45,000 kilometres in the second year. Depreciation for the second year, using the units of production method, is $______.
3. A machine costing $72,000, with an estimated useful life of five years and a residual value of $12,000, is depreciated by the straight-line method. This asset is sold for $50,000 at the end of the second year of use. The gain or loss on the disposal is $______.
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