What would the journal entry be to record the sale of the rental machines on December 31, 2016 for $500 million in cash because IBM no longer thought they would be useful. (for reference) 1. What effect would the entry above have on gross margin, current ratio and return on investment for 2016? 2. If rental machines are traded in for new rental machines that have a value of 2,200 million but IBM pays only 1,800 million in cash for them because of the trade in what will the journal entry be? 3. If IBM spent $50 million on plant, laboratory and office equipment at the beginning of 2016, show the journal entry if the $50 million is treated as a repair. 4. Show the journal entry if the $50 million is treated as an improvement. 5. How would you calculate depreciation for 2016 on the plant, laboratory and office equipment differently if you record the $50 million as an improvement instead of a repair?

NOTEG. PROPERTY, PLANTANDEQUIPMENT $ in miions) At December 31 Land and land improvements Buildings and building improvements Plant, laboratory and of fice equipment Plantand other property-goss Less: Accu mulated depreclation Plant and other property-net Rental machines Less: Accu mulated depreciation Renta machines-net Total-net 2015 558 6,552 21,116 29,150 28,226 18,842 18,051 10,176 1,115 565 551 $10,830 $10,727 2016 506 6,326 22,318 10,308 984 461 523