Reference no: EM133110145
Question - On July 1, 2020, Brown Bear Inc. purchased a machinery at $450,000 to produce a new product. Brown Bear paid $20,000 for shipping, $6,000 for legal fees, $4,200 for installation of the machinery and 2,500 for testing fees. Brown Bear also had to repair one part of the Machinery that was damaged during the testing, which cost $3,000. Brown Bear has a fiscal year end of December. The machinery's useful life is 15 years or 72,000 units of the new product. Its residual value is estimated as $70,000. Brown Bear uses double declining method to calculate depreciation.
Required -
1) Calculate the Machinery total cost at acquisition.
2) On December 31, 2021, Brown Bear changed its estimation of residual value to 55,000. Calculate the depreciation expense for 2021.
3) The Machinery was sold on December 31, 2022 for $240,000 cash. Prepare the journal entry to record the sale.
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