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Calculate the depreciation expense

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Question - Ian Co. has provided you with the following information about its long term assets: On July 1, 2018, Ian purchased machinery costing $3,500,000 from a manufacturing company outside the country. Ian paid $200,000 to ship the machinery to Canada. Ian also paid $50,000 to install the machinery. Ian estimates the useful life of the machinery to be 10 years with $500,000 residual value. Ian uses the straight line method of depreciation for the machinery. The company yearend is December 31.

Required -

a. Prepare the journal entry necessary on July 1, 2018 to record the purchase of the machinery. Enter your answer in the section provided on the right side of this sheet.

b. Calculate the depreciation expense for 2018, and 2019 using the straight line method and prepare the journal entries to record the depreciations for 2018 and 2019.

c. On January 1, 2020 Ian changed the estimate of the residual value to $400,000 and the total useful life to 12 years. Calculate the depreciation expense for 2020.

d. On January 1 2021 Ian sold the machinery for $3,000,000. Prepare the journal entry for this transaction.

Reference no: EM133101689

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