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You are called in to make an examination of the FISH Co. as of December 31, 20Y9. The company has been in existence for six
You are called in to make an examination of the FISH Co. as of December 31, 20Y9. The company has been in existence for six years and has not been audited before. There is only one machinery account as shown below. The bookkeeper tells you that he has been using a straight-line depreciation rate of 20% per year, which was suggested by the manufacturers of the machines. The company policy is to depreciate the machine for the full year's rate in the year of acquisition and none in the year of disposition. Machinery Date Description Debit Credit 1/4/20Y4 Machine 1 VR 1 15,000 7/2/20Y4 Machine 2 VR 21 20,000 12/31/20Y4 Depreciation GJ 7,000 4/1/20Y5 Machine 3 VR 29 9,000 12/31/20Y5 Depreciation GJ 19,000 7/1/20Y6 Machine 4 (Machine 1 trade in allowance P 10,000) VR 38 55,000 12/1/20Y6 Repairs to machine 3 VR 42 1,000 12/31/20Y6 Depreciation 27,200 6/12/20Y7 Major overhaul of Machine 2 which extended the life of the machine by 2 yrs VR 48 8,000 7/1/20Y7 Automatic control put on Machine 4 VR 51 10,000 10/1/20Y7 Sold Machine 3 CR 5,000 12/31/20Y7 Depreciation GJ 20,400 12/31/20Y8 Depreciation GJ 20,400 7/1/20Y9 Sold Machine 4 CR 14,000 12/31/20Y9 Depreciation GJ 5,800
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