The following data relate to the Machinery account of Eshkol, Inc. at December 3

Question

The following data relate to the Machinery account of Eshkol, Inc. at December 31, 2014.

Machinery

A

B

C

D

*In the year an asset is purchased, Eshkol, Inc. does not record any depreciation expense on the asset.

In the year an asset is retired or traded in, Eshkol, Inc. takes a full year’s depreciation on the asset.

The following transactions occurred during 2015.

Cash

17,940

    Machinery (Machine A)

17,940

Machinery

A

B

C

D

Original cost $63,480 $70,380 $110,400 $110,400 Year purchased 2009 2010 2011 2013 Useful life 10 years 15,000 hours 15 years 10 years Salvage value $4,278 $4,140 $6,900 $6,900 Depreciation method Sum-of-the-years'-digits Activity Straight-line Double-declining balance Accum. depr through 2014* $43,056 $48,576 $20,700 $22,080

Explanation / Answer

Solution: Journal Entries Particulars Debit Credit (a) Cash      17,940.00 Machinery (Machine A) 15,042.00 Profit on sale of Machinery (Machine A)     2,898.00 [Refer Working note (i)] (b) Depreciation on Machine B      13,597.42 Machinery (Machine B) 13,597.42 [Refer Working note (ii)] [c] Depreciation on Machine C      11,828.57 Machinery (Machine C) 11,828.57 [Refer Working note (iii)] (d) Depreciation on Machine E        7,728.00 Machinery (Machine E)     7,728.00 [Refer Working note (iv)] Workings: (i) Total Depreciation: Depreciation upto 2014      43,056.00 Add: Dep for 2005        5,382.00 So total accumulated depreciation      48,438.00 Less: Cost of Assets      63,480.00 So WDV of Assets in 2015      15,042.00 Selling price of the assets      17,940.00 Less: WDV of the Assets      15,042.00 So profit on sale of assets        2,898.00 (ii) Total Cost of Machiner B      70,380.00 Total useful hours      15,000.00 So depreciation per hour                 4.69 Total hours during 2015        2,898.00 So total Depreciation in 2015      13,597.42 (iii) The cost of the machinery C 1,10,400.00 Salvage value        6,900.00 Useful life 15 years So depreciation        6,900.00 So total depreciation charged upto 2014      20,700.00 Remaing Balance of Machinery      89,700.00 The revised remaing balance of life                 7.00 So revised amount of Depreciation      11,828.57 (iv) The cost of the machinery      38,640.00 The useful life 10 years The depreciation percentage                 0.10 As per double declining method the rate of depreciation is (10%*2)                 0.20 So depreciation in 2015        7,728.00

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