What is the depreciation for year

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Reference no: EM132947309

Question - At the beginning of the year Jimmy Jones 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= $750

The machine is estimated to have a useful life of 7 years and a residual value of$2500.

Consider the following items (each item stands alone):

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

2. If Jimmy Jones Company decided to use straight-line depreciation, what is the depreciation for year 1 and year 2? Provide the journal entry to each year.

3. If Jimmy Jones Company decided to use double declining for depreciation, what is the depreciation for year 1 and year 2? Provide the journal entry for each year.

4. If Jimmy Jones Company decided to use the sum of the year's digits depreciation, what is the depreciation for year 1 and year 2? Provide the journal entry for each year.

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

6. Assume that on July I of year 5, Jimmy Jones Company sells the quilting machine for $16,250. Provide the journal entry to record the sale of the machine. Assume straight-line depreciation.

7. 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 $2000. Provide the journal entry record the impairment loss. Assume straight-line depreciation.

Reference no: EM132947309

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