Mike Devereaux Company shows the following entries in its Equipment account for 2021. All amounts are based on historical cost. Equipment 2021     2021     Jan. 1.1 Balance 134,750 June 30 cost of equipment sold Aug. 10 Purchases 32,000    (purchased prior to 2021) 23,000 Aug..12 Freight on equipment purchased 700     Aug..25 Installation costs 2,700     Nov. 10 Repairs 500       Instructions a.   Prepare any correcting entries necessary. b.   Assuming that depreciation is to be charged for a full year on the ending balance in the asset account, compute the proper depreciation charge for 2021 under each of the methods listed below. Assume an estimated life of 10 years, with no salvage value. The machinery included in the January 1, 2021, balance was purchased in 2019.   1. Straight-line.  2. Sum-of-the-years’-digits.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Mike Devereaux Company shows the following entries in its Equipment account for 2021. All amounts are based on historical cost.

Equipment
2021     2021    
Jan. 1.1 Balance
134,750
June 30 cost of equipment sold
Aug. 10 Purchases
32,000
   (purchased prior to 2021)
23,000
Aug..12 Freight on equipment purchased
700
   
Aug..25 Installation costs
2,700
   
Nov. 10 Repairs
500
   

 

Instructions

a.   Prepare any correcting entries necessary.

b.   Assuming that depreciation is to be charged for a full year on the ending balance in the asset account, compute the proper depreciation charge for 2021 under each of the methods listed below. Assume an estimated life of 10 years, with no salvage value. The machinery included in the January 1, 2021, balance was purchased in 2019.

  1. Straight-line.  2. Sum-of-the-years’-digits.

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