Answer:
No entry
Depreciation account is debited by $4,100
Explanation:
(a). Purchase value of machine = $60,000
Originally estimated life of machine = 8 years
Salvage value at the end of time = $4000
Annually depreciated value of machine = (Purchase value of machine -Salvage value of machine) ÷ Original estimated year
= ($60,000 - $4000) ÷ 8
=$56,000 ÷ 8 = $7,000 per year
Depreciation on the 5 year basis = $7000 × 5 = $35,000
Value of machine after 5 year = $60,000 - $35,000 = $25,000
Remaining life Depreciation =10 - 5 = 5 years
New depreciated amount value = Value of machine after 5 year - New salvage value
= $25,000 - $4,500
= $20,500
Annual Depreciation next 5 years= $20,500 ÷ 5 = $4,100 per year
No entry is needed because $4,100 per year will give salvage value of $4,500.
B) Entry to record the depreciation (2015)
Depreciation A/c Dr. $4100
To Machinery A/c $4100
( Being depreciation for 2015 is recorded)
Depreciation account is debited in the income and expenses account. Because it is a expenses.
Hence, Machinery value will come down in assets side of balance sheet.
