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Cadillac Construction Company uses the retirement method to determine depreciation on its small tools. During 2009, the first year of the company's operations, tools were purchased at a cost of $8,000. In 2011, tools originally costing $2,000 were sold for $250 and replaced with new tools costing $2,500.
Required:
1. Prepare journal entries to record each of the above transactions.
2. Repeat requirement 1 assuming that the company uses the replacement depreciation method instead of the retirement method.
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