Reference no: EM132808390

Donguri Ltd. has a machine costing $860,000 with the estimated useful life of 8 years and an estimated residual value of $60,000. Donguri uses the straight-line method to depreciate its capital assets. The ledger shows a balance of $425,000 in the accumulated depreciation on December 31, 2020. The following transactions are related to the machine:

2021:

• February 1 Donguri paid $9,500 to repair a broken part in the machine.
• March 31 Donguri paid $70,000 to replace the motor, as a result, the useful life of the machine has been extended for 2.5 more years.

2022:

• June 30 Donguri sold the machine for $350,000.

Required:

Problem 1: What is the age of the machine on December 31, 2020? Identify the type of expenditure for the transaction on February 1 and March 31, 2021.

Problem 2: What is the annual depreciation expense amount before the estimate changes? What is the annual depreciation expense amount after the estimate changes?

Problem 3: Please record all journal entries for 2021.

Problem 4: Please calculate the gain or loss on the disposal of the machine, and record all journal entries related to the disposal of the machine.