Reference no: EM131941030
Questions -
Q1. Chen Company completed the following transactions and events involving its delivery trucks.
2010
Jan. 1 Paid $25,015 cash plus $1,785 in sales tax for a new delivery truck estimated to have a five-year life and a $2,300 salvage value. Delivery truck costs are recorded in the Trucks account.
Dec. 31 Recorded annual straight-line depreciation on the truck.
2011
Dec. 31 Due to new information obtained earlier in the year, the truck's estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,850. Recorded annual straight-line depreciation on the truck.
2012
Dec. 31 Recorded annual straight-line depreciation on the truck.
Dec. 31 Sold the truck for $5,500 cash.
Required: Prepare journal entries to record these transactions and events in the given order.
Q2. Saturn Co. purchases a used machine for $288,000 cash on January 2 and readies it for use the next day at an $8,000 cost. On January 3, it is installed on a required operating platform costing $1,600, and it is further readied for operations. The company predicts the machine will be used for six years and have a $34,560 salvage value. Depreciation is to be charged on a straight-line basis. On December 31, at the end of its fifth year in operations, it is disposed of.
Required:
1. Prepare journal entries to record the machine's purchase and the costs to ready and install it. Cash is paid for all costs incurred.
2. Prepare journal entries to record depreciation of the machine at December 31.
(a) Its first year in operations.
(b) The year of its disposal.
3. Prepare journal entries to record the machine's disposal under each of the following separate assumptions
(a) It is sold for $23,500 cash.
(b) It is sold for $94,000 cash.
(c) It is destroyed in a fire and the insurance company pays $34,000 cash to settle the loss claim.
Q3. Ming Yue Company pays $350,000 for real estate plus $18,550 in closing costs. The real estate consists of land appraised at $218,400; land improvements appraised at $62,400; and a building appraised at $239,200.
Allocate the total cost among the three purchased assets.
Q4. In early January 2011, LabTech purchases computer equipment for $174,000 to use in operating activities for the next four years. It estimates the equipment's salvage value at $36,000.
Prepare a table showing depreciation and book value for each of the four years assuming straight-line depreciation.
Q5. Millworks Company owns a milling machine that cost $126,700 and has accumulated depreciation of $90,800. Prepare the entry to record the disposal of the milling machine on January 5 under each of the following independent situations.
1. The machine needed extensive repairs, and it was not worth repairing. Millworks disposed of the machine, receiving nothing in return.
2. Millworks sold the machine for $15,600 cash.
3. Millworks sold the machine for $35,900 cash.
4. Millworks sold the machine for $41,900 cash.
Q6. In early January 2011, LabTech purchases computer equipment for $147,000 to use in operating activities for the next four years. It estimates the equipment's salvage value at $30,000.
Prepare a table showing depreciation and book value for each of the four years assuming double-declining-balance depreciation.