Question

On January 1, 2017, Marco Polo Co. ordered a new machine to help increase production for one of its most popular products.

The machine had an invoice price of $30,000 and Marco Polo Co. was required to pay shipping $1,200 and insurance during shipping $300 by boat from Nanaimo, B.C. to Latish, Québec.

The machine arrived on January 5, 2017 and was installed at a cost of $800 and calibrated and tested for a cost of $200.

On February 1, 2017 it was put into operation.

Required

1. Prepare a journal entry (or entries) to record all costs associated with the new machine
2. The machine was expected to last 10 years with a salvage value of $2,500. Prepare the journal entry to record depreciation for 2017 and subsequent years using the double-declining balance method of depreciation.
3. Marco Polo Co. sold the machine on July 1, 2020 for $19,000. Prepare all journal entries required related to the machine and its disposal in 2020.

Marco Polo Co.'s fiscal year runs from January to December. Round all final answers to the nearest dollar.

Answer 1

А 1 A D F Н Purchase of Machinery - All cost Incurred on Machinery upto the machine is put to use are capitalized Date Particular Debit Credit 2 3 2017 4 32,500 5 05-Jan Machinery A/c Dr. To Cash/ Bank (Being Machine purchased and installed) 32,500 6 8 B Depreciation - Double declining Method 10 Depreciation = 2 x (Cost - Salavge Value)/Life = 2 x (32,500 - 2,500)/10 = 6000 12 Date Particular Debit Credit 2017 15 16 6,000 17 31-Dec Depreciation A/c Dr. To Machine A/C (Being Depreciation Charged) 6,000 18 9 2018 1 6,000 31-Dec Depreciation A/c Dr. To Machine A/C (Being Depreciation Charged) 6,000

046 A B E F 25 26 6,000 2019 31-Dec Depreciation A/c Dr. To Machine A/C (Being Depreciation Charged) 6,000 27 28 29 30 3,000 2020 30-Jun Depreciation A/c Dr. To Machine A/C (Being Depreciation Charged for 6 months) 3,000 31 32 33 34 35 C 36 37 Sale of Machinery Debit Credit 38 19000 39 40 Date Particular 2020 01-Jul Cash/ Bank A/c Dr. To Machine A/C To Profit and Loss A/c (Being machine sold at a profit of $7,500) 11500 41 7500 42 43

Machine A/C Cost Depreciation 2017 Depreciation 2018 Depreciation 2019 Depreciation 2020 for 6 Months 32,500 6,000 6,000 6,000 3,000 WDV of machine Sale Value Profit 11,500 19,000 7,500