On January 1, 2012, JacksonCompany purchased factory equipment priced at $55,000. Sales tax was an additional 6%, and the company spent $4,000 toinstall the machinery. After the company began using the machine(placed in service), there were additional costs of $800 forinsurance and $1,200 for maintenance.
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 whatamount 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 ____ Balance Sheet ____
Revenue expenditure____ Income Statement ____
2. Prepare thejournal entry to record depreciation for 2012, assuming the companyuses the straight-line method. .
_________________________________________________________
_________________________________________________________
Computation:
3. Computedepreciation for 2012, assuming the company uses the units of production method. The equipment produced30,000 units in 2012.
$_____________
4. Compute depreciation for 2012 AND 2013, assuming the company usesthe double-declining balancemethod. .
2012: $_____________
2013: $_____________
5. Assume that thecompany chose straight-line (as you did in #2).On March 31, 2014, Jackson sold the equipment for$35,000 in cash. Notice that the sale did not occur on December31!
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 $______________
(Circle one)
Prepare the journal entry torecord 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 toinstall the machinery. After the company began using the machine(placed in service), there were additional costs of $800 forinsurance and $1,200 for maintenance.
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 whatamount 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 ____ Balance Sheet ____
Revenue expenditure____ Income Statement ____
2. Prepare thejournal entry to record depreciation for 2012, assuming the companyuses the straight-line method. .
_________________________________________________________
_________________________________________________________
Computation:
3. Computedepreciation for 2012, assuming the company uses the units of production method. The equipment produced30,000 units in 2012.
$_____________
4. Compute depreciation for 2012 AND 2013, assuming the company usesthe double-declining balancemethod. .
2012: $_____________
2013: $_____________
5. Assume that thecompany chose straight-line (as you did in #2).On March 31, 2014, Jackson sold the equipment for$35,000 in cash. Notice that the sale did not occur on December31!
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 $______________
(Circle one)
Prepare the journal entry torecord the sale:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
