The Savage Corporation purchased three milling machines on January 1, 2013 and immediately placed them in service. The following information relates to these purchases:
|
Machine1 |
Machine2 |
Machine3 |
|
|
Cost |
$7,500 |
$7,500 |
$7,500 |
|
Residual value |
-0- |
1,200 |
300 |
|
Useful life |
5 Years |
6 Years |
8 Years |
The company uses the straight-line method of depreciation, and records ½ year depreciation in the years of acquisition and disposal. On January 1, 2018, machine 1 was sold for $500. On the same day, management re-evaluated the estimated useful lives and the residual values of the remaining machines. They came to the conclusion that machine 2 had a remaining useful life of two years (that is, to December 31, 2019), while residual value remained unchanged. Machine 3 had a remaining useful life of five years (that is, to December 31, 2022) but now no residual value.
Required: Prepare journal entries
- To record the sale of machine 1 on January 1, 2018.
- To record the revised 2018 depreciation expense for machine 2.
- To record the revised 2018 depreciation expense for machine 3.
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