QUESTION 1

Fairfield Oil Drilling Company bought a Mitashi copier machine for $170,000 on April 1, 2010. Management estimated a useful life of 8 years or 400,000 pieces of copier papers and a residual value of $10,000. The business financial year ends at December 31 of each year and the company uses the straight-line method of depreciation.

Required:

Answer each question should be answered independently. (No explanation is required)

1. Journalize the depreciation expense for the year ended December 31, 2010, based on straight-line method.

2. If 28,000 pieces of papers were printed via the machine for the year 2016, journalize the depreciation expense for the year ended December 31, 2016 based on unit-of- used/production method.

3. Prepare the journal entry to record depreciation expense for the year ended December 31, 2010, based on double declining balance method.

4. Assume that on January 1, 2017, the copier machine was sold to Hillfork Trading Co for $23,000. Journalize the sale of the machine on this date based on straight-line depreciation method.

5. Assume that on January 1, 2017, the machine was exchange for a similar, silent digital machine for a cost of $220,000. A trade-in allowance of $42,000 was given on the old machine and the balance on the purchase price is to be paid in cash. Journalize the exchange of asset.

6. Assume that on January 1, 2017, Fairfield Oil estimated that the copier machine can last for another two more years beyond its original useful life of 8 years due to limited usage. However, its residual value will be reduced to $5,250. Prepare journal entry to record the depreciation expense for the year ended December 31, 2017.