On May 1st, 2020, Design Factory Co. purchased a new machine at $128,000 with credit...
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On May 1st, 2020, Design Factory Co. purchased a new machine at $128,000 with credit term of 2/10, n/30. The company was given 10% trade discount for being a loyalty customer. Design Factory Co. also paid for the following cost: delivery charge from sellers allocation $1,600, sales tax $8,100, cost of test run $2,900, training cost for workers who will operate the machine $1,800, normal repair $950 for the machine in May 2020, insurance cost $4,500, extended warrantly taken out on the machine $5,700. The company made their payment within a discounted period. The machine has a useful life of 6 years and a salvage value of $4,400. Assuming the fiscal year ended at December 31st.
Required: 1) Compute the cost of the machine. Prepare journal entry to record the purchase.
2) Prepare the depreciation schedule to record depreciation expense during 6 years under: a. Straight-line method b. Double declining balance method
3) Prepare journal entry for the below transaction, using straight-line method: a. Assuming Design Factory sold the machine on October 31,2024 for $30,050. b. After 6 years, the company received $8,000 book value on the retirement of the machine.
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