Reference no: EM132564413
Kennett Company purchased a machine on January 1, 2015, the machine is estimated to have a useful life of 5 Years with a residual value of $ 80,000. In addition to the purchase price $ 420,000 paid, the following additional costs were incurred: (i) sales tax @10% of purchase price was paid (ii) transportation and insurance costs $3,000 while the machinery was in transit from the seller, (iii) personnel training costs $ 15,000 for initial operation of the machinery, (iv) annual city operating license $ 2,000 (v) Build shades costing $ 12,000 to safe machinery from sun (vi) lubrication of the machinery gearing before the machinery was placed into service $ 3,000 (vii) lubrication of the machinery gearing after the machinery was placed into service $ 800 and (viii) installation costs necessary to secure the machinery to the building flooring $ 5,000.
Required
Question 1: Calculate and record the cost of machinery on Jan-01, 2015.
Question 2: Calculate the depreciation expense of machinery over its useful life assume company is using 150% diminishing balance method.
Question 3: On the basis of your calculations in (b) above Assume on Jan-01, 2018 company plans to sell this machine at a price of $ 100,000. What will be the entry in the books of Kennett if this sale materialize?