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    On July 1 of the current year, a company purchased and placed in service a machine with a cost of $240,000. The company estimated the machine's useful life to be four years or 60,000 units of output with an estimated salvage value of $60,000. During the current year, 15,000 units were produced.

    Prepare the necessary December 31 adjusting journal entry to record depreciation for the current year assuming the company uses:

    a) The straight-line method of depreciation
    b) The units-of-production method of depreciation.
    c) The double-declining balance method of depreciation.

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    Solution Preview

    a) The straight-line method of depreciation

    In straight line method, the depreciation per year is (Cost - Salvage Value)/Useful life
    Annual Depreciation = (240,000-60,000)/4 = 45,000
    Since the machine is used for 6 months, the depreciation for 6 months = ...

    Solution Summary

    The solution explains how to calculate the depreciation using the straight-line method of depreciation, the units-of-production method of depreciation and the double-declining balance method of depreciation.