On July 1, 2020, Ivanhoe Company acquired a new machine for $172,000 and estimated it would have a useful life of 10 years and residual value of $6,700. At the beginning of 2023, the company decided that the machine would be used for nine more years (including all of 2023), and at the end of this time its residual value would be only $1,075. On November 1, 2024, the machine was sold for $82,000. The company uses the straight-line method of depreciation and closes its books on December 31. Give the necessary journal entries for the acquisition, depreciation, and disposal of this asset for the years 2020, 2023, and 2024. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to O decimal places, e.g. 2,345.)
On July 1, 2020, Ivanhoe Company acquired a new machine for $172,000 and estimated it would have a useful life of 10 years and residual value of $6,700. At the beginning of 2023, the company decided that the machine would be used for nine more years (including all of 2023), and at the end of this time its residual value would be only $1,075. On November 1, 2024, the machine was sold for $82,000. The company uses the straight-line method of depreciation and closes its books on December 31. Give the necessary journal entries for the acquisition, depreciation, and disposal of this asset for the years 2020, 2023, and 2024. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries. Round answers to O decimal places, e.g. 2,345.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:On July 1, 2020, Ivanhoe Company acquired a new machine for $172,000 and estimated it would have a useful life of 10 years and
residual value of $6,700. At the beginning of 2023, the company decided that the machine would be used for nine more years
(including all of 2023), and at the end of this time its residual value would be only $1,075. On November 1, 2024, the machine was sold
for $82,000. The company uses the straight-line method of depreciation and closes its books on December 31.
Give the necessary journal entries for the acquisition, depreciation, and disposal of this asset for the years 2020, 2023, and 2024.
(Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when the amount is entered.
Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before
credit entries. Round answers to O decimal places, e.g. 2,345.)
Date
Account Titles and Explanation
(To record depreciation expense)
(To record sale of equipment)
Debit
__
Credit
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