PRUBLEM 3 (8 points Dietz owned a machine costing $25,000, had accumulated depre

Question

PRUBLEM 3 (8 points Dietz owned a machine costing $25,000, had accumulated depreciation of $20,000. It was sold for $8,000 cash. Prepare the journal entry to record the sale. PROBLEM 4(8 points) Assume that a company acquires a $20,000 asset estimated to have a six-year useful life and a $2,000 residual value. At the beginning of the third year, management decides that the asset will last for six more years. The revised estimate of useful life is, therefore, a total of eight years. Residual value stays at $2,000. Calculate the depreciation expense for the fourth year and for each of the remaining years.

Explanation / Answer

Question - 2

Initial Depreciation = (20000 - 2000) / 6 years = 3000

After two years of use = 20000 - 2*3000 = 14000 is the book value.

When the life of the asset is revised ........ Depreciation shall be adjusted prospectively over remaining life

(Remaining book value - Scrape ) / Estimated remaining life = (14000 - 2000) / 6 years = 2000

Depreciation expenses for fourth year or any year = 2000...........final answer

Detail Debit Credit Cash account 8000 Accumulated Depreciation 20000 Machinery Account 25000 Gain on asset disposal account 3000

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