Grindstone Corp. (Grindstone) produces fad toys for children. In 2014, Grindstone purchased a new stamping machine to produce the latest fad toy. The machine cost

\($75,000\) plus taxes of \($9,750\) and delivery and installation was \($2,500\). Grindstone’s management estimates that the market for the toy is about 515,000 units and demand will last seven years. Management expects it will be able to produce and sell 70,000 units in 2014; 100,000 units in 2015 through 2018; 45,000 units in 2019; and 5,000 units in 2020. Once the fad dies, the machine won’t be useful and will be sold for scrap, for about \($2,000\). Grindstone will use unit-of-production depreciation for the machine.

Required:

a. Prepare the journal entry to record the purchase of the new machine.

b. Prepare a schedule showing the depreciation expense for each year and the carrying amount of the machine at the end of each year.

c. Suppose that early in 2016 Grindstone’s management realized that the fad would be shorter than it expected and sales would end in 2018. Management estimated it would sell 150,000 units in 2016; 90,000 in 2017; and 20,000 in 2018, at which time the machine would be scrapped for \($1,000\). Prepare a schedule showing the depreciation expense for 2016, 2017, and 2018, and the carrying amount of the machine at the end of each year. Assume Grindstone’s original estimates for 2014 and 2015 were correct.

d. What entry would be made in 2016 to reflect the change in the number of units of the toy that would be sold?