On December 31, 2020, Buffalo Inc. has a machine with a book value of $1,034,000. The original cost and related accumulated depreciation at this date are as follows. Machine Less: Accumulated depreciation Book value $1,430,000 396,000 $1,034,000 Depreciation is computed at $66,000 per year on a straight-line basis. Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal.
On December 31, 2020, Buffalo Inc. has a machine with a book value of $1,034,000. The original cost and related accumulated depreciation at this date are as follows. Machine Less: Accumulated depreciation Book value $1,430,000 396,000 $1,034,000 Depreciation is computed at $66,000 per year on a straight-line basis. Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal.
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 December 31, 2020, Buffalo Inc. has a machine with a book value of $1,034,000. The original cost and related accumulated
depreciation at this date are as follows.
Machine
Less: Accumulated depreciation
Book value
$1,430,000
396,000
$1,034,000
Depreciation is computed at $66,000 per year on a straight-line basis.
Presented below is a set of independent situations. For each independent situation, indicate the journal entry to be made to record
the transaction. Make sure that depreciation entries are made to update the book value of the machine prior to its disposal.
Transcribed Image Text:(b)
On April 1, 2021, Buffalo sold the machine for $1,144,000 to Yoakam Company. (Credit account titles are automatically indented
when 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.)
Date Account Titles and Explanation
April 1, 2021
April 1, 2021
(To record current depreciation.)
(To record sale of the machine.)
Debit
W
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