Answer:
Year 1 Depreciation: $288,000;
Year 2 Depreciation: $128,000;
Year 3 Depreciation: $192,000;
Year 4 Depreciation: $192,000;
Year 5 Depreciation: 0.
Accounting for Disposal of Machine:
Dr Cash $90,000
Dr Accumulated Depreciation - Machine $800,000
Cr Machine $800,000
Cr Gain on machine disposal $90,000
Explanation:
- Depreciation calculation:
Depreciation in Year 1: Depreciation rate x Cost of asset x 2 = (4,500/25,000) x $800,000 x 2 = $288,000;
Depreciation in Y2 = $800K/25,000 x 4,000 = $128,000;
Depreciation in each year of Y3 and Y4: $800K/25,000 x 6,000 = $192,000;
Depreciation in Y5: 0 ( as total depreciation after Y4 is equal to book value which is $800,000);
- Gain calculation:
As the book value of the machine at the time of disposal is 0; gain on disposal is the sales proceed receipt $90,000
