On April 1, 20-3, Kwik Kopy Printing purchased a copy machine for $50,000. The estimated life of the machine is five years, and it has an estimated salvage value of $5,000. The machine was used until July 1, 20-6.

REQUIRED

1. Assume that Kwik Kopy uses straight-line depreciation and prepare the following entries:

(a) Adjusting entries for depreciation on December 31 of 20-3 through 20-5.

(b) Adjusting entry for depreciation on June 30, 20-6, just prior to trading in the asset.

(c) On July 1, 20-6, the copy machine was traded in for a new copy machine.

The market value of the new machine is $38,000. Kwik Kopy must trade in the old copy machine and pay $22,000 for the new machine.

2. Assume that Kwik Kopy uses sum-of-the-years’-digits depreciation and prepare the following entries:

(a) Adjusting entries for depreciation on December 31, 20-3 through 20-5.

(b) Adjusting entry for depreciation on June 30, 20-6, just prior to trading in the asset.

(c) On July 1, 20-6, the copy machine was traded in for a new copy machine. The market value of the new machine is $38,000. Kwik Kopy must trade in the old copy machine and pay $22,000 for the new machine.