Chapter 3
Long-Term Assets
123
AP-8B (
3
)
Leonard Corporation acquired a machine in the first week of October 2015 and paid the
following bills.
Invoice Price
$40,000
Freight In
5,000
Installation Cost
7,000
The estimated useful life of the machine is eight years with no residual value. The company
has December 31 as its year-end and uses a straight-line depreciation method to depreciate
long-term assets. Leonard Corporation depreciates their assets based on the number of
months they owned the asset during the year.
Required
a) Calculate the book value of the machine on December 31, 2016.
b) On December 31 2016, the business sold the machine for $40,000. The sale happened
after the journal entry to record the year’s depreciation. Prepare the journal entry to record
the sale of the machine.
Date
Account Title and Explanation
Debit
Credit
