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Prepare the journal entries for the purchase

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Question - Gibco purchased a new piece of machinery. It paid $160,000 to the manufacturer and $5,000 transportation and $12,000 in taxes on July 1, 2021. The equipment went into service August 1, 2021. The company uses the declining balance approach to depreciation. The machine has a useful life of 5 years and an estimated $9,000 residual value.

1. Prepare the journal entries for the purchase and the 2021 and 2022 depreciation (Dec 31 year- end).

2. Explain the purpose and timing of the recording of depreciation expense.

3. ASSUME THE COMPANY USEES STRAIGHT LINE DEPRECIATION FROM THE START. Prepare the journal entries for. Sale of the machinery on October 1, 2023, for $125,000 cash.

Reference no: EM133177042

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