Sandusky Enterprise purchased a machine on January 3, 2011. The machine cost $46
ID: 2480039 • Letter: S
Question
Sandusky Enterprise purchased a machine on January 3, 2011. The machine cost $46,000 with an estimated salvage value of $2,000 and an estimated useful life of 10 years. As a result of technological improvements, a revision of the machine's useful life and estimated salvage value was made. On January 1, 2014, the equipment was estimated to last through 2015 with an estimated value at that time of $500. Sandusky uses the straight-line method for depreciation.
Prepare the journal entry to record depreciation on December 31, 2014.
Explanation / Answer
A revision of the machine's useful life and estimated salvage value was made on January 1, 2104.
The revised useful life is 2 years and salvage value = $ 500
The Orginal Cost of the Machine = $ 46,000
Depreciation for the year 2011 = $ 4,400 [ (46000-2000)/ 10 ]
Depreciation for the year 2012 = $ 4,400 [ (46000-2000)/ 10 ]
Depreciation for the year 2013 = $ 4,400 [ (46000-2000)/ 10 ]
Total Depreciation up to 2013 = $ 13,200
Wrttien Down Value of the Machine at January 1, 2104 = $ 32,800 ( 46000 - 13200)
Useful life 2 year that is 2014 and 2015, and salvage value = $ 500
Therefore, Depreciation for the year 2014 (under straight line method) = $ 16,150 [ (32800 - 500 ) / 2 ]
The Journay entry to record depreciation on December 31, 2014,
Debit Depreciation Account $ 16,150
Credit Machinery Account $ 16,150
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