On January 1, 2012, JacksonCompany purchased factory equipment priced at$55,000. Sales tax was an additional 6%,and the company spent $4,000 to install the machinery. After thecompany began using the machine (placed in service), there wereadditional costs of $800 for insurance and $1,200 formaintenance.
The estimated useful life ofthe machine was five years and residual value was expected to be$6,300. The equipment is expected to produce 200,000 units duringits useful life.
Required:
1. At what amount should Jackson record the purchase of themachine?
$____________
What is the appropriate treatment for the maintenance andinsurance?
(i.e., Are they capital orrevenue expenditures? Check one. Do they belong on the incomestatement or the balance sheet? Check one.)
Capital expenditure ____ BalanceSheet ____
Revenue expenditure____ Income Statement ____
2. Prepare the journal entry to record depreciation for 2012, assumingthe company uses the straight-line method..
_________________________________________________________
_________________________________________________________
Computation:
3. Compute depreciation for 2012, assuming the company uses theunits of production method. The equipmentproduced 30,000 units in 2012.
$_____________
4. Compute depreciation for 2012 AND 2013, assuming the companyuses the double-declining balance method..
2012: $_____________
2013: $_____________
5. Assume that the company chose straight-line (as you did in #2). On March 31, 2014,Jackson sold the equipment for $35,000 incash. Notice that the sale did notoccur on December 31!
a. What was the accumulated depreciation of this equipment on thedate
of sale?
$_____________
b. What was the book value on the date of sale?
$_____________
c. What was the gain/loss on sale?
Gain Loss $______________
(Circleone)
d.Prepare the journal entry to record the sale?
On January 1, 2012, JacksonCompany purchased factory equipment priced at$55,000. Sales tax was an additional 6%,and the company spent $4,000 to install the machinery. After thecompany began using the machine (placed in service), there wereadditional costs of $800 for insurance and $1,200 formaintenance.
The estimated useful life ofthe machine was five years and residual value was expected to be$6,300. The equipment is expected to produce 200,000 units duringits useful life.
Required:
1. At what amount should Jackson record the purchase of themachine?
$____________
What is the appropriate treatment for the maintenance andinsurance?
(i.e., Are they capital orrevenue expenditures? Check one. Do they belong on the incomestatement or the balance sheet? Check one.)
Capital expenditure ____ BalanceSheet ____
Revenue expenditure____ Income Statement ____
2. Prepare the journal entry to record depreciation for 2012, assumingthe company uses the straight-line method..
_________________________________________________________
_________________________________________________________
Computation:
3. Compute depreciation for 2012, assuming the company uses theunits of production method. The equipmentproduced 30,000 units in 2012.
$_____________
4. Compute depreciation for 2012 AND 2013, assuming the companyuses the double-declining balance method..
2012: $_____________
2013: $_____________
5. Assume that the company chose straight-line (as you did in #2). On March 31, 2014,Jackson sold the equipment for $35,000 incash. Notice that the sale did notoccur on December 31!
a. What was the accumulated depreciation of this equipment on thedate
of sale?
$_____________
b. What was the book value on the date of sale?
$_____________
c. What was the gain/loss on sale?
Gain Loss $______________
(Circleone)
d.Prepare the journal entry to record the sale?
