FINANCIAL ACCOUNTING TEST 2 Prof. R.S. Claire 5 NOTE: USE THE JOURNALS PROVIDED

Question

FINANCIAL ACCOUNTING TEST 2 Prof. R.S. Claire 5 NOTE: USE THE JOURNALS PROVIDED IN THIS DOCUMENT TO MAKE THE REQUIRED JOURNALS ENTRIES On 1/1/17 Meganco purchased a new lathe for $400,000 installed. The physical life of the lathe is 10 years with a salvage value of $20,000 at the end of that time period. The lathe was purchase for a contract that will provide revenue to Meganco for 5 years. The lathe will be sold at the end of the contract for $50,000 1. Book valve, cost-Accum depr Make the required journal entry on 12/31/17 and 12/31/18 assuming that the lathe is depreciated using 200% double declining balance. Required: Kenco purchased a new CNC lathe 6 years ago that had an installed cash cost of $475,000. The lathe was being depreciated over 8 years using straight line deprecation without taking salvage value into consideration. On 12/31 of the sixth year, Kenco sold the lathe to a machine tool dealer for $85,000. 2. 9 Assume that lathe has been depreciated over six years and that accumulated depreciation is up to date. Make the required journal entry to record the transaction in Kenco'saccounting system. Required:

Explanation / Answer

Calculate depreciation entry :

Straight line rate = 100/5=20%

Double decline rate = 20*2=40%

Date accounts & explanation debit credit 12/31/17 Depreciation expenses a/c (400000*40%) 160000 Accumlated depreciation a/c 160000 (To record depreciation expenses) 12/31/18 Depreciation expenses a/c (400000*60%*40%) 96000   Accumlated depreciation a/c 96000 (To record depreciation expenses)

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