Problem 1

Red Brick Company purchased a front-end loader and tractor for $44,000 on October 1, 2010. The tractor has an estimated useful life of six years or 25,800 hours and a residual value of $2,000. Listed in the chart below is the number of hours the tractor and front-end loader were used during 2011 through 2017.

Year # of hours used

2010 2,600

2011 4,200

2012 3,900

2013 4,150

2014 4,300

2015 4,000

2016 3,100

a) Calculate depreciation using the straight line method for 2010 through 2016.

b) Calculate depreciation using units of production method for 2010 through 2016.

c) Calculate depreciation using declining balance method for 2010 through 2016.

Problem 2

Custom Flags purchased a sewing machine in January 2013 for $6,000. Custom depreciated the machine using the straight line method with an estimated useful life of 10 years and a residual value of $200.

a) Calculate depreciation using the straight line method for 2013, 2014, and 2015.

b) Determine book value for the sewing machine as of December 31, 2015.

c) Record the journal entry for the sale of the sewing machine on October 1, 2016 for $3,600.

d) Record the journal entry for the sale of the sewing machine on October 1, 2016 for $4,000.