York Instruments completed the following transactions and events involving its machinery. Year 1 Jan. 1 Paid $107,800 cash plus $6,470 in sales tax for a new machine. The machine is estimated to have a six-year life and a $9,720 salvage value. Dec. 31 Recorded annual straight-line depreciation on the machinery. Year 2 Dec. 31 The machine’s estimated useful life was changed from six to four years, and the estimated salvage value was increased to $14,345. Recorded annual straight-line depreciation on the machinery. Year 3 Dec. 31 Recorded annual straight-line depreciation on the machinery. 31 Sold the machine for $25,240 cash. Required Prepare journal entries to record these transactions and events.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
York Instruments completed the following transactions and events involving its machinery.
Year 1
Jan. 1 Paid $107,800 cash plus $6,470 in sales tax for a new machine. The machine is estimated to
have a six-year life and a $9,720 salvage value.
Dec. 31 Recorded annual straight-line
Year 2
Dec. 31 The machine’s estimated useful life was changed from six to four years, and the estimated salvage
value was increased to $14,345. Recorded annual straight-line depreciation on the machinery.
Year 3
Dec. 31 Recorded annual straight-line depreciation on the machinery.
31 Sold the machine for $25,240 cash.
Required
Prepare
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