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March 10th Q Paper

March 10th Q Paper - March 10th 2011 Garfield Inc produces...

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March 10 th , 2011 Garfield, Inc. produces frozen Italian food. The company purchased a machine on Jul 1, 2005. It has an estimated residual value of $0 and an estimated lifetime of 17 years. The company records depreciation on a straight-line basis. Depreciation expense is recorded to the nearest whole month and Accumulated Depreciation is $27,000 as at Dec 31, 2006. A. What was the cost to purchase the machine on Jul 1, 2006? B. What was the journal entry to record Depreciation Expense for 2007? C. Due to a shift in consumer demand towards Chinese food, the machine was sold on Nov 1, 2008 for $220,000. $100,000 was received in cash; the remainder will be collected on Nov 15. Record the journal entry associated with this sale. Early in its first year of business, Key Inc., a locksmith and security consultant, purchased new equipment. The acquisition included the following costs: Purchase price $168,000 Tax $16,500 Transportation $4,400 Setup* $1,100 Operating Costs for the first year $26,400 * the equipment was adjusted to key’s specific needs The bookkeeper recorded the asset ‘Equipment’ at $216,400. Key used straight-line depreciation.
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