(1) On 1/1/04 Jack of All Trades, Inc. bought the following assets for a combined purchase price of $75,000 cash:
Asset Market Value (1/1/04) Useful life Residual Value
Oil Well $60,000 5,000 barrels $10,000
Furniture $30,000 5 years $4,000
a. Show the journal entry for Jack of All Trades' asset purchase on 1/1/04
b. How much depletion expense should the company record on 12/31/04 if 1,200 barrels of oil were produced during 2004?
c. Jack of All Trades uses the double-declining balance method for the furniture. Show the depreciation schedule.
d. On 1/1/06, Jack of All Trades sells the furniture for $30,000. Show the journal entry for the sale.
(2) Burke Copy Center purchased a machine on Jan 1, 2009 for $180,000 and estimated its useful life and salvage value at ten years and $30,000, respectively. On Jan 1, 2014, the company added three years to the original useful-life estimate.
a. Compute the book value of the machine as of Jan 1, 2014, assuming that Burke recognizes the depreciation using straight line.
b. Prepare the journal entry to record depreciation entered by the company on Dec 31, 2014, assuming that Burke uses straight-line.