Rayya Co. purchases and installs a machine on January 1, 2015, at a total cost of $105,000. Straight- depreciation is taken each year for four years assuming a seven-year life and no salvage value. The chine is disposed of on July 1, 2019, during its fifth year of service. Prepare entries to record the pa year's depreciation on July 1, 2019, and to record the disposal under the following separate assumptic 1. The machine is sold for $45,500 cash. 2. An insurance settlement of $25,000 is received due to the machine's total destruction in a fire.

Rayya Co. purchases and installs a machine on January 1, 2015, at a total cost of $105,000. Straight- depreciation is taken each year for four years assuming a seven-year life and no salvage value. The chine is disposed of on July 1, 2019, during its fifth year of service. Prepare entries to record the pa year's depreciation on July 1, 2019, and to record the disposal under the following separate assumptic 1. The machine is sold for $45,500 cash. 2. An insurance settlement of $25,000 is received due to the machine's total destruction in a fire.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 8P: Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of...

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On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.
During 2019, Ryel Companys controller asked you to prepare correcting journal entries for the following three situations: 1. Machine A was purchased for 50,000 on January 1, 2014. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 25,000. The estimated residual value remains at 5,000, but the service life is now estimated to be 1 year longer than estimated originally. 2. Machine B was purchased for 40,000 on January 1, 2017. It had an estimated residual value of 5,000 and an estimated service life of 10 years. it has been depreciated under the double-declining-balance method for 2 years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method. 3. Machine C was purchased for 20,000 on January 1, 2018, Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value of the machine is 2,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record depreciation expense for 2019.
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