Question

Zephyr Minerals completed the following transactions involving machinery Machine No. 1550 was purchased for cash on April 1, 2017, at an installed cost of $80,000. Its useful life was estimated to be six years with a $5,000 trade-in value Straight-line depreciation was recorded for the machine at the ends of 2017, 2018, and 2019. On March 29, 2020, it was traded for Machine No. 1795, with an installed cash price of $74,000. A trade in allowance of $31.410 was received for Machine No. 1550, and the balance was paid in cash. The fair values of Machine No. 1550 and Machine No. 1795 could not be determined. Machine No. 1795's life was predicted to be four years with a trade in value of $9,400. Double declining-balance depreciation on this machine was recorded each December 31. On October 2, 2021. It was traded for Machine No. BT-311, which had an installed cash price of $587,000, the machine's fair value. A trade-in allowance of $10,000 was received for Machine No. 1795, and the balance was paid in cash It was estimated that Machine No. BT-311 would produce 200,000 units of product during its five year useful life, after which it would have a $25,000 trade-in value Unisof production depreciation was recorded for the machine for 2021, a period in which it produced 36,000 units of product. Between January 1, 2022, and August 21, 2024, the machine produced 111.000 more units. On August 21, 2024. it was sold for $82.400 Required: Prepare journal entries to record (Round intermediate calculations to the nearest whole dollar.) a. The depreciation expense recorded to the nearest whole month on the first December 31 of each machine's life. (Round the final answers to the nearest whole do journal entry required in the first account field.) not required ansaction, sel No

Answer 1

Zephyr Minerals Requirement 1 Journal Enteries Date Particulars Debit in $ Credit in $ 31.12.2017 Depreciation Expense, Machine 1550 a/c Dr. 9375 To Accumulated Depreciation, Machine 1550 9375 Machine 1550 Depreciation Expense/ Accumulated Depreciation: ($80,000 - $5,000) / 6 years = $12,500 x 3 = 37500 $12,500/ 12 months= $1041.67 $1,041.67 x 9 months = $9,375 31.12.2017 Depreciation Expense, Machine 1795 a/c Dr. 31908.75 To Accumulated Depreciation, Machine 1795 Machine 1795 Depreciation Expense/ Accumulated Depreciation: $85,090 x 2/4 = $42,545 $42,545/ 12 months= $3,545.42 $3,545.42 x 9 months= $31,908.75 Cash: $74,000-$31,410 = $42,590 Machine 1795: ($80,000+ $42,590) - $37,500 = $85,090 31.12.2017 Depreciation Expense, Machine BT 311 a/c Dr. 101160 To Accumulated Depreciation, Machine BT 311 101160 Machine BT-311 Depreciation Expense/ Accumulated Depreciation: [(original cost-salvage value)/estimated production capability] x units produced that year [($587,000-$25,000)/200,000 units] x 36,000 units = $101,160

Requirement 2 b) The purchase/exchange/disposal of each machine. Journal Enteries Date Particulars 1.4.2017 Machine 1550 a/c To Cash Dr. Debit in $ Credit in $ 80000 80000 1.4.2017 85090 37500 Machine 1795 a/c Dr. Accumulated Depreciation, Machine 1550 a/c Dr. To Cash To Machine 1550 42590 80000 Dr. 2.10.2021 Machine BT-311 a/c Dr. 587000 Accumulated Depreciation, Machine 1795 a/c Dr. 51852 Loss on disposal a/c 23238 To Machine 1795 85090 To Cash 577000 Cash: $587,000-$10,000= $577,000 Loss on disposal: (577,000+ $85,090) - ($587,000+ $47,891) = $20,699 Machine 1795 Accumulated Depreciation: [(85,090 - $31,908.75) x 2/4]/ 12 months= $2,215.89 $2,215.89 x 9 months= $19,942.97 $19,942.97 +$31,908.75 = $51,851.69 Dr. Dr. 21.10.2021 Cash a/c 82400 Accumulated Depreciation, Machine BT-311 a/c Dr. 413070 Loss on disposal a/c 91530 To Machine BT-311 587000 Machine BT-311 Accumulated Depreciation: [(original cost-salvage value) estimated production capability] x units produced that year [($587,000-$25,000)/ 200,000 units] x (36,000 units+ 111,000 units) = $413,070 Loss on disposal: $587,000 - $82,400- $413,070 = $91,530