Beginning PPE contains 635000 in equipment purchased at the

Beginning PP&E contains $635,000 in equipment purchased at the beginning of 2014 and $1,000,000 in land. The equipment is expected to last until the end of 2018 and will have $10,000 salvage value. The machine purchased is expected to last until March 2021 and will have $5,000 salvage value. Company uses the straight line method for depreciation.

Record the journal entry for the transaction.

Solution

Cost of equipment 635000 Salvage value 10000 Depreciable cost 625000 Life of equipment 5 Depreciation per year 125000 Depreciation expense 125000                 Accumulated depreciation - equipment 125000