Trenton Company

Exercise 1: On January 1, 2010, Trenton Company purchased a machine costing $50,000. Trenton also incurred the following costs: transportation, $1,000; installation, $2,000; and sales tax, $3,000. Prepare the journal entry to record the machine acquisition assuming cash was paid. Exercise 2: Hi-Crest Company purchased a machine on January 1, 2010, for $300,000. The machine has an estimated useful life of 5 years and a $10,000 residual value. Calculate depreciation expense and the year-end book value for 2010 and 2011 using the double declining-balance method of depreciation.

*$120,000 = $300,000 2/5
**$72,000 = $180,000 2/5
Exercise 3:
Hubbard Company purchased a truck on January 1, 2009, at a cost of $34,000. The company estimated that the truck would have a useful life of 4 years and a residual value of $4,000.
A. Calculate depreciation expense under straight line and double declining balance for 2009-2012.
B. Which of the two methods would result in lower net income in 2010 and 2012?
A.
Straight-line: ($34,000 - 4,000)/4 years = $7,500
Declining-balance:
2009 ¼ x 200% x $34,000 = $17,000
2010 ¼ x 200% x ($34,000 - $17,000) = $8,500
2008 ¼ x 200% x ($34,000 - $25,500) = $4,250
2009 Book value $4,250 - $4,000 target book value = $250
B. Lower net income: 2010, double declining-balance; 2012, straight-line.
Exercise 4: Beckworth Company purchased a truck on January 1, 2009, at a cash cost of $10,600. The estimated residual value was $400 and the estimated useful life 4 years. The company uses straight-line depreciation computed monthly. On July 1, 2012, the company sold the truck for $1,900 cash.
A. What was the depreciation expense amount per month?
B. What was the amount of accumulated depreciation at July 1, 2012?
C. Give the required journal entries on the date of disposal, July 1, 2012. (Assume no 2012 depreciation had yet been recorded) Exercise 5: Bennett Corporation sold a piece of equipment on June 30, 2012 for $50,000 cash. The