Answer:
1. Assume that Kwik Kopy uses straight-line depreciation and prepare the following entries:
a. Adjusting entries for depreciation on December 31 of 20-3 through 20-5.
b. Adjusting entry for depreciation on June 30, 20-6, just prior to trading in the asset.
c. On July 1, 20-6, the copy machine was traded in for a new copy machine. The market value of the new machine is $38,000. Kwik Kopy must trade in the old copy machine and pay $22,000 for the new machine.
2. Assume that Kwik Kopy uses sum-of-the-years'-digits depreciation and prepare the following entries:
a. Adjusting entries for depreciation on December 31, 20-3 through 20-5.
b. Adjusting entry for depreciation on June 30, 20-6, just prior to trading in the asset.
c. On July 1, 20-6, the copy machine was traded in for a new copy machine. The market value of the new machine is $38,000. Kwik Kopy must trade in the old copy machine and pay $22,000 for the new machine.
Step-by-step explanation:
Cost 50000
DEP 5 years
Salvage Value 5000
Purchase April 1 20-2
Until July 1, 20-6
Straigth Line Depreciation
Cost Salvage value Net value Depreciation Net book value
50000 5000 45000
Apri 1 2002 45000
Dec 31 2002 9 months 45000 6750 38250
Dec 31 2003 38250 9000 29250
dec 31 2004 29250 9000 20250
Dec 31 2005 20250 9000 11250
Jun-30 2016 11250 4500 6750
--1a--
Dr Depreciation expense____________$9000
Cr Acummulate Depreciation_______________$9000
Anual depreciation 2003
--2a--
Dr Depreciation expense____________$9000
Cr Acummulate Depreciation_______________$9000
Anual depreciation 2004
--3a--
Dr Depreciation expense____________$9000
Cr Acummulate Depreciation_______________$9000
Anual depreciation 2005
--1b--
Dr Depreciation expense____________$4500
Cr Acummulate Depreciation_______________$4500
Anual depreciation 2006
---1c---
Dr Accumulate depreciation_________$38250
Cr Machinery____________________________$50000
Dr Machinery_____________________$38000
Cr Bank_________________________________$22000
Cr Income in Asset sales_____________________$4250