Question
The Perth Construction Company purchased a piece of machinery on June 29, 2013 for $53 000. Freight costs came to $800. It cost $1 700
The Perth Construction Company purchased a piece of machinery on June 29, 2013 for
$53 000. Freight costs came to $800. It cost $1 700 to install and test the machinery. At this time it was
estimated that the machine would be used for six years and would have a residual value of $8,000 at
that time.
Before recording the 2016 depreciation expense, the owners realized that this machinery would last
only five years, and therefore revised the amortization expense calculation.
On July 2, 2017, the machine broke down and rather than repair it, the company decided to sell it for
$12 000.
a) Prepare the journal entry to record the purchase of the machine on June 29, 2013
b) Calculate the depreciation charges that would appear on the 2013 and 2014 income
statements, using the straight-line method of depreciation.
c) Show the journal entry for the 2013 depreciation.
d) Show how the machine would appear in the Perth Construction Company Balance Sheet on
December 31, 2015, presuming the straight-line method of depreciation is used.
e) Prepare the journal entry for the July 2, 2017 transaction.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started