Reference no: EM132774613
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 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.
Required -
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 in used.
e) Prepare the journal entry for the July 2, 2017 transaction.