Depreciation
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On Jan 1 2005, J Company purchased equipment for 95,000. J co. paid 2,000 to have the machine installed. The equipment is expected to have a 5 year useful life and a salvage of 7,000.
A.) Compute the depreciation expense for 2005 and 2006 using straight line depreciation.
B.) What is the book value at the beginning of 2007?
C.) Assume the equipment was sold on Jan 1, 2007 for 65,000. Compute the amount of gain or loss from the sale.
D.) Prepare the journal entry to record the sale of equipment.
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Solution Summary
The solution explains various calculation under straight line method. It helps compute the depreciation expense, book value, and amount of gain or loss. It also helps prepare a journal entry.
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Please see below for solutions.
A.) Compute the depreciation expense for 2005 and 2006 using straight line depreciation.
Under straight line method, depreciation is same in all years
Total installed cost of the machine is ...
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