Problem NO: 3

The following data relate to the Machinery account of Eshkol, Inc. at December 31, 2014. Machinery\nA B C D\nOriginal cost $46,000 $51,000 $80,000 $80,0

The following data relate to the Machinery account of Eshkol, Inc. at December 31, 2014. Machinery

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A B C D

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Original cost $46,000 $51,000 $80,000 $80,000

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Year purchased 2009 2010 2011 2013

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Useful life 10 years 15,000 hours 15 years 10 years

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Salvage value $ 3,100 $ 3,000 $ 5,000 $ 5,000

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Depreciation Sum-of-the- Double-decliningmethod years’-digits Activity Straight-line balance

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Accum. depr. through 2014* $31,200 $35,200 $15,000 $16,000

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*In the year an asset is purchased, Eshkol, Inc. does not record any depreciation expense on the asset.

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In the year an asset is retired or traded in, Eshkol, Inc. takes a full year’s depreciation on the asset.

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The following transactions occurred during 2015.

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(a) On May 5, Machine A was sold for $13,000 cash. The company’s bookkeeper recorded this retirement in the following manner in the cash receipts journal.

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Cash 13,000

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Machinery (Machine A) 13,000

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(b) On December 31, it was determined that Machine B had been used 2,100 hours during 2015.

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(c) On December 31, before computing depreciation expense on Machine C, the management of

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Eshkol, Inc. decided the useful life remaining from January 1, 2015, was 10 years.

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(d) On December 31, it was discovered that a machine purchased in 2014 had been expensed completely in that year. This machine cost $28,000 and has a useful life of 10 years and no salvage value.

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Management has decided to use the double-declining-balance method for this machine, which can be referred to as “Machine E.”

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Instructions

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Prepare the necessary correcting entries for the year 2015. Record the appropriate depreciation expense on the above-mentioned machines.

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