Recording Asset Acquisition, Depreciation, and Disposal

On January 2, 2016, Verdi Company acquired a machine for $75,000. In addition to the purchase price, Verdi spent $2,100 for shipping and installation, and $2,600 to calibrate the machine prior to use. The company estimates that the machine has a useful life of 5 years and a residual value of $11,000.

Required a. Prepare journal entries to record the acquisition costs.

Description	Debit	Credit
AnswerCashMachineryAccumulated depreciationDepreciation expenseGain on sale of machineryLoss on sale of machinery	Answer	Answer
AnswerCashMachineryAccumulated depreciationDepreciation expenseGain on sale of machineryLoss on sale of machinery	Answer	Answer

b. Calculate the annual depreciation expense using straight-line depreciation and prepare a journal entry to record depreciation expense for 2016.

Description	Debit	Credit
AnswerCashMachineryAccumulated depreciationDepreciation expenseGain on sale of machineryLoss on sale of machinery	Answer	Answer
AnswerCashMachineryAccumulated depreciationDepreciation expenseGain on sale of machineryLoss on sale of machinery	Answer	Answer

c. On December 31, 2019, Verdi sold the machine to another company for $14,000. Prepare the necessary journal entry to record the sale.

Description	Debit	Credit
Cash	Answer	Answer
Accumulated depreciation	Answer	Answer
AnswerCashMachineryAccumulated depreciationDepreciation expenseGain on sale of machineryLoss on sale of machinery	Answer	Answer
AnswerCashMachineryAccumulated depreciationDepreciation expenseGain on sale of machineryLoss on sale of machinery	Answer	Answer