Reference no: EM132886684

Question - At the beginning of the year, Joe's Company purchased a quilting machine for $35,000. The following expenditures were incurred:

-Freight = $1,200

-Installation = $1,200

-Property tax on the machine for the first year = $750The machine is estimated to have a useful life of 7 years and a residual value of $2,500.

Consider the following items (each item stands alone):

-What is the initial cost of the machine? Provide the journal entry.

-If Joe's Company decides to use straight-line depreciation, what is the depreciation for year 1 and year 2? Provide the journal entry for each year.

-If Joe's Company decides to use double declining for depreciation, what is the depreciation for year 1 and year 2? Provide the journal entry for each year.

-If Joe's Company decides to use the sum of the year's digits for depreciation, what is the depreciation for year 1 and year 2? Provide the journal entry for each year.

-Assume that at the end of year 3 (before recording the annual depreciation), Joe Company changes the useful life from 7 years to 10 years. Provide the journal entry for year 3 annual depreciation. Assume straight-line depreciation.

-Assume that on July 1 of year 5, Joe's Company sells the quilting machine for $16,250. Provide the journal entry to record the sale of the machine. Assume straight-line depreciation.

-Assume that at the end of year 4, it has been determined that the quilting machine is impaired. Under impairment, the quilting machine is now worth $2,000. Provide the journal entry to record the impairment loss. Assume straight-line depreciation. How does one draft a memo to the chief financial officer (CFO) on areas of concern related to tangible assets and recommendations to mitigate areas of concern in future transactions?