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Question

On July 1, 2007, red gate farm buys a combine for 100,00 in cash. assume that the combine is expected to have a seven-year life and an estimated salvage velue of 16,000 at the end of that time.

1. prepare the journal entry to recorf the purchase of the combine on July 1, 2007.

2. compute the depreciable cost of the combine.

2 days ago - 1 day left to answer.

Answer 1

The amount to be depreciated over 7 years is 84,000 (100,000 purchase price minus 16,000 salvage value).

The journal entry to record the purchase would be a credit to cash or loan payable and a debit to equipment.

The depreciation would be 12,000 per year, or 1,000 per month. The journal entries for this would be a debit to Combine-accumulated depreciation and a credit to depreciation expense. This entry would be done monthly for 1,000.

Good luck.