Depreciation Methods Jamrock Jeeps Incorporated is in the business of producing
ID: 2478621 • Letter: D
Question
Depreciation Methods
Jamrock Jeeps Incorporated is in the business of producing fuel efficient all-terrain Jeeps. Jamrock Jeeps purchases a new robotic assembly machine on April 30, 2013 for $7,250,000; that has an estimated life of 10 years; and a Jeep production capacity of 5,000,000. In the engine of the robotic assembly machine is a solid gold covering for the outer mantel of the gear box, the 24 Karat gold covering is used because it is soft and has more give than steel. It is estimated that this gold covering will have a resale value of $1,500,000 at the end of the machines life.
Open Space to Be Used As Needed:
1.) Prepare the appropriate journal entries using the straight-line method to account for the annual deprecation incurred on Jamrock Jeeps assembly machine at December 31, 2013; December 31, 2014; December 31, 2015; and December 31, 2016.
December 31, 2013 Entry:
December 31, 2014 Entry:
December 31, 2015 Entry: December 31, 2016 Entry:
2.) Jamrock Jeeps decides to sale the robotic assembly machine on March 31, 2017. If the company received $5,250,000 in cash for the robotic machine on March 31, 2017, what would the entry be to account for the sale of the robotic assembly machine on March 31, 2017? [Be Careful-accounting for this transaction will require more than one journal entry] March 31, 2017 Entry:
3.) Prepare the appropriate journal entries for December 31, 2013; December 31, 2014; December 31, 2015 and December 31, 2016 using the information given for Jamrock Jeeps purchase of the new robotic assembly machine above. Assume the organization uses the double-declining balance method to account for the annual deprecation incurred on the assembly machine.{Round to the nearest cent $000,000.00}
December 31, 2013 Entry:
December 31, 2014 Entry:
December 31, 2015 Entry:
December 31, 2016 Entry:
4.) Jamrock Jeeps decides to sale the robotic assembly machine on September 30, 2017. If the company received $3,150,000 in cash for the robotic machine on September 30, 2017, what would the entry be to account for the sale of the robotic assembly machine on September 30, 2017? [Be Careful-accounting for this transaction will require more than one journal entry] {Round to the nearest cent $000,000.00}
September 30, 2017 Entry:
Explanation / Answer
In straight line method, depreciation is calculated as
(Original cost of the asset - residual value ) / expected life period of the asset
=7250000-150000
10 years
= 575000
During 2013 the asset has remained in the business from April to December ie, 8 months. so the amount of depreciation chargeable on 2013 is 575000*8/12 = 383333
1) Journal entries
Robotics Assembly Account Dr.
To Bank Account
7250000
Depreciation Account Dr.
To Robotics Assembly Account
383333
Depreciation Account Dr.
To Robotics Assembly Account
575000
Depreciation Account Dr.
To Robotics Assembly Account
575000
Depreciation Account Dr.
To Robotics Assembly Account
575000
2) on sale of assets:
Depreciation to be chargeable is only for 3 months= 5750000*3/12 = 143750
You need to find out the book value of the assets by preparing an Asset Account or you may calculate it as
7250000 - (383333+575000+575000+575000+143750)
= 4997917
Profit on sale of asset is sale value - book value
5250000 - 4997917 = 252083
So the entry is
Depreciation Account Dr.
To Robotics Assembly Account
143750
Cash Account Dr.
To Robotics Assembly Account
To Profit and Loss Account
4997917
252083
30--04-2013Robotics Assembly Account Dr.
To Bank Account
72500007250000
31-12-2013Depreciation Account Dr.
To Robotics Assembly Account
383333383333
31-12-2014Depreciation Account Dr.
To Robotics Assembly Account
575000575000
31-12-2015Depreciation Account Dr.
To Robotics Assembly Account
575000575000
31-12-2016Depreciation Account Dr.
To Robotics Assembly Account
575000575000
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