Reference no: EM133030901
Question - A company purchased a machine at the cost of $675,900 on Feb 1 of year 1. On the same day, the business paid the shipping company $7,500 to deliver the machine and paid $16,400 to another business to install and test the new machine. The annual insurance policy for the new machine is $8,600. The company's fiscal year end is October 31.
The company's accounting policy is to depreciate all machines using the double diminishing balance method. The machine has an expected useful lifespan of eight-years and an estimated residual value of $30,000. However, the company discovered the machine did not meet its business requirements, so it sold the machine on April 1, year 3, for $398,500. Perform all your calculations to the nearest dollar. Show all your work.
Required -
(a) Prepare the journal entries to record the purchase of the machine and year-end adjusting entries for year 1 and Year 2. Not necessary to prepare the adjusting entry to record insurance expense.
(b) Show the presentation of the machine in the balance sheet, year-end, year 2.
(c) Prepare the journal entry(s) to record the sale of the machine.
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