Problem
ABC Dairy Company purchased a new ice cream machine on April 1, 2021 for $100,000 on credit. The supplier agreed to provide a credit term of 5/30, n/60. On April 28, ABC Company paid the supplier taking advantage of the purchase discount.
ABC Company expects to use the machine for 10 years, and it estimates the residual value of the machine is $5,000. ABC Company decides to use straight-line method for amortization. Assuming ABC Company has a fiscal year end of December 31. On Sep. 1, 2022, ABC Company decided not to produce ice cream anymore, thus sold the ice cream machine for $85,000 cash.
Task
a) Record the journal entries for the purchase of the machine on April 1, and later payment in cash on April 28, 2021.
b) At Dec. 31, 2021, calculate the accrued amortization and record it in adjusting entries.
c) Record all relevant entries for the sales of the machine on Oct. 1, 2022.
d) Assume that instead of $85000, ABC Company had sold $75,000 for the ice cream machine. Re-record the sale journal entry given this new sale price as you did in requirement 3 above.