Reference no: EM132530122
Question - On August 1, 2015, a machine with a cost of $420,000 was traded-in for a new machine with a cost of $650,000. The seller agreed to receive $285,000 in cash and the old machine. The machine is depreciated using the straight line method with a 15,000 residual value and a useful life of 5 years. The accumulated depreciation has a total balance of $324,000 on December 31, 2014.
Prepare journal entries and show calculation to:
a. Record depreciation for 2015 up to the date of disposal.
b. Record the trade-in transaction.
Assume the company changed the depreciation method to the Double declining one, prepare the journal entries and show calculation to:
Record depreciation for 2015 up to the date of disposal.
c. Record the trade-in transaction.
d. Which method should the company adopt if it wants to report high NI in 2012 and 2013?
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