Determine the initial cost of the machine

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Reference no: EM13343440

Nidley Company purchased a machine on 1 January 2007. The following expenditures were associated with the purchase:
$
List price 21,000
Delivery charges 2,500
Installation of machine 1,500

The machine was estimated to have a five-year useful life and a salvage value of $5,000.

On 1 January 2009, the machine was overhauled at a cost of $6,000. The overhaul extended its useful life from 5 years to 6 years.

On 1 January 2011, the company traded in this machine and paid $3,000 cash for a newer model. There was no gain or loss on this exchange.

The company uses the straight-line method of depreciation.

Required:

a) Determine the initial cost of the machine. Explain your answer.

b) Determine the depreciation expense, accumulated depreciation and net book value of the machine for the years 2007, 2008, 2009 and 2010.

c) Prepare journal entries to record the trade-in of the machine.

 

Reference no: EM13343440

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