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    Business Problem: Depreciation

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    Problem 1: On January 1, Year 1, Jayco purchased a machine for $6000. It had an estimated salvage value of $400 and a life of seven years. The straight-line method of depreciation was used. At mid-year in Year 4, Jayco sold the machine for $4500 cash.

    a. What is the book value of the machine a the time of the sale?
    b. Give the journal entry to record the sale of the machine?

    Account Description......................Debit.................Credit

    Problem 2: Assume a firm has acquired an asset for $100 000 on January 1, Year 1. The asset has a 6-year life and a salvage value of $10 000. The firm has a choice between using straight-line or sum-of-year's-digits depreciation methods. Calculate the depreciation expense for each of the six ears using each method.

    ............Straight-Line.............Sum-of-the Year's Digits
    Year 1
    Year 2
    Year 3
    Year 4
    Year 5
    Year 6

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    Solution Summary

    The solution approached two different problems - journal entry on disposal of machine and depreciation calculations using straight line and sum of year digits. The solution is enclosed within a Word document.