Red Brick Company purchased a front-end loader and tractor for $45,000 on April 1 of year 1. The tractor has an estimated useful life of six years or 22,000 hours and a residual value of $1,000. Listed in the chart below is the number of hours the tractor and front-end loader were used during year 1 through 7.

Year # of hours used

1 3,190

2 2,970

3 3,490

4 3,650

5 4,045

6 3,775

7 880

a) Calculate depreciation using the straight line method for years 1 through 7.

b) Calculate depreciation using units of production method for years 1 through 7.

c) Calculate depreciation using declining balance method for years 1 through 7.

Problem 2

Custom Flags purchased a sewing machine in January year 1 for $10,000. Custom depreciated the machine using the straight line method with an estimated useful life of 9 years and a residual value of $100.

a) Calculate depreciation using the straight line method for years 1-3.

b) Determine book value for the sewing machine as of December 31 of year 3.

c) Record the journal entry for the sale of the sewing machine on October 1 of year 4 for $6,000.

d) Record the journal entry for the sale of the sewing machine on October 1 of year 4 for $5,500.