Reference no: EM132928405

At the beginning of the year, Jimmy Jones Company purchased a quilting machine for $70,000. The following expenditures were incurred:

Freight = $2,400
Installation = $2,400
Property tax on the machine for the first year = $1,500The machine is estimated to have a useful life of 7 years and a residual value of $5,000.

Consider the following items (each item stands alone):

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

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

Problem 3: If Jimmy Jones 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.

Problem 4: If Jimmy Jones 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.

Problem 5: Assume that at the end of 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.

Problem 6: Assume that on July 1 of year 5, Jimmy Jones Company sells the quilting machine for $32,500. Provide the journal entry to record the sale of the machine. Assume straight-line depreciation.

Problem 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 $2,000. Provide the journal entry to record the impairment loss. Assume straight-line depreciation.