On April 1, 20-3, Kwik Kopy Printing purchased a copy machine for $50,000. The estimated life of the machine is five years, and it has an estimated salvage value of $5,000. The machine was used until July 1, 20-6. Required:
1. Assume that Kwik Kopy uses straight-line depreciation and prepare the following entries:
a. Adjusting entries for depreciation on December 31 of 20-3 through 20-5.
b. Adjusting entry for depreciation on June 30, 20-6, just prior to trading in the asset.
c. On July 1, 20-6, the copy machine was traded in for a new copy machine. The market value of the new machine is $38,000. Kwik Kopy must trade in the old copy machine and pay $22,000 for the new machine.

2. Assume that Kwik Kopy uses sum-of-the-years'-digits depreciation and prepare the following entries:
a. Adjusting entries for depreciation on December 31, 20-3 through 20-5.
b. Adjusting entry for depreciation on June 30, 20-6, just prior to trading in the asset.
c. On July 1, 20-6, the copy machine was traded in for a new copy machine. The market value of the new machine is $38,000. Kwik Kopy must trade in the old copy machine and pay $22,000 for the new machine.

1. Assume that Kwik Kopy uses straight-line depreciation and prepare the following entries:

a. Adjusting entries for depreciation on December 31 of 20-3 through 20-5.

b. Adjusting entry for depreciation on June 30, 20-6, just prior to trading in the asset.

c. On July 1, 20-6, the copy machine was traded in for a new copy machine. The market value of the new machine is $38,000. Kwik Kopy must trade in the old copy machine and pay $22,000 for the new machine.

2. Assume that Kwik Kopy uses sum-of-the-years'-digits depreciation and prepare the following entries:

a. Adjusting entries for depreciation on December 31, 20-3 through 20-5.

b. Adjusting entry for depreciation on June 30, 20-6, just prior to trading in the asset.

c. On July 1, 20-6, the copy machine was traded in for a new copy machine. The market value of the new machine is $38,000. Kwik Kopy must trade in the old copy machine and pay $22,000 for the new machine.

Explanation:

Cost50000      

DEP5years    

Salvage Value5000      

PurchaseApril 1 20-2      

UntilJuly 1, 20-6      

Straigth Line Depreciation      

 CostSalvage valueNet valueDepreciationNet book value

 50000500045000  

Apri 1 2002  45000    

Dec 31 20029 months  45000675038250

Dec 31 2003    38250900029250

dec 31 2004    29250900020250

Dec 31 2005    20250900011250

Jun-30 2016    1125045006750

--1a--      

Dr Depreciation expense$9000      

Cr  Acummulate Depreciation$9000      

Anual depreciation 2003      

--2a--      

Dr Depreciation expense$9000      

Cr  Acummulate Depreciation$9000      

Anual depreciation 2004      

--3a--      

Dr Depreciation expense$9000      

Cr  Acummulate Depreciation$9000      

Anual depreciation 2005      

--1b--      

Dr Depreciation expense$4500      

Cr  Acummulate Depreciation$4500      

Anual depreciation 2006      

---1c---      

Dr Accumulate depreciation$38250      

Cr Machinery$50000      

Dr Machinery$38000      

Cr Bank$22000      

Cr Income in Asset sales$4250      

answer makes less frequent trips to the bank and firms make less frequent price changes;