Answer to Question #216319 in Accounting for zuby

Question

On April 1, 20X1, Chang and Chang Inc. invested in a new machine to manufacture soccer balls. The machine is expected to manufacture 1,400,000 balls over its life of three years and then it will be scrapped. The machine cost $50,000 including normal and necessary costs of setting it up. Chang will use units-of-production to depreciate the machine.

1.

Record depreciation for 20X1 and 20X2 assuming that 450,000 balls were manufactured and sold in 20X1 and 600,000 were manufactured and sold in 20X2.

2.

On January 1, 20X3, Chang decides to get out of the soccer ball business, and sells the machine for $15,000. Record this journal entry

Answer 1

1. 20x1,Depreciation Expense

Accumulated depreciation

$=(50000×450000)÷1400000$

$=\$16071.14$

20x2, Depreciation Expense

Accumulated Depreciation

$=(50000×600000)÷1400000$

$=\$21428.57$

2. Jan 1,20x3,

Cash. 15000 Dr

Acc.Depreciation 37500 Dr

Equipment 50000 Cr

Gain on sale of equipment. 2500 Cr

Dr-debit

Cr-credit