Problem 1- Depreciation Methods

ABC Company purchased a new piece of equipment that cost $950,000, salvage or trade-in value to be $50,000 and planning to use this equipment for 5 years. Please calculate depreciation using (a) straight-line method and (b) double-declining method for the 5 years.

Problem 2-Journal entries

Prepare journal entries to record the following transactions.

a) January 1, 2009 ABC Company purchased a network computer system (#46) for $500,000. Delivery charge and installation fee totaled $35,000. The company plans to use this computer for 4 years and will have a salvage/trade-in value of $20,000. The company signed a note for this entire purchase.

b) December 31,2009 Record straight-line depreciation on computer (#46)

c) January 1, 2010 ABC Company decided to sell computer (#46) for $ 250,000 cash.

d) January 2, 2010 Company decided to purchase a smaller computer (#47) for $65,000. Delivery charge and installation fee totaled $2,000. Company paid cash for this computer and plans to use this computer for 3 years and will have a salvage/trade-in value of $7,000

e) December 31, 2010 Record straight-line depreciation on computer (#47)

f) January 1, 2011 ABC Company decides to sell computer (#47) after only one year. Machine was sold for $45,000

g) January ABC Company purchased computer (#48) for $125,000 cash. No delivery charge or installation fee on this computer. Company plans to use this computer for 4 years and will have a salvage/trade-in value of $12,000

h) December 31, 2011 Record straight-line depreciation on computer (#48)

i) January ABC Company decided to trade-in computer (#48) for a new computer (#50) Computer (#50) will be used for 3 years with a salvage/trade-in value of $7,000. No delivery or installation charge on computer (#50). The invoice for the exchange showed the following:

Price of the new computer (#50) $130,000

Trade-in allowance granted on old computer (#48) $75,000

Amount paid in cash for new computer (#50) $55,000

No delivery charge or installation fee for new computer (#50) ---0---

J) December 31, 2012 Record straight-line depreciation on computer (#50)