Given how rapidly the business is growing, Ezy Solutions Pty Ltd is considering purchasing a packaging machine, which will have a total cost of $650 000. It expects the machine to last 12 years and have a residual / salvage value of $50 000 at that point in time.

1. Calculate both the 'Accumulated depreciation' balance and the 'Carrying amount' (or the 'Netbook value') balance of the packaging machine at the end of the second year using each of the following depreciation methods.

a) Straight-line.

b) Reducing balance (10 percent rate).

2. Suppose that, on the first day of the third year, the packaging machine is sold for $600 000 cash in total. For both

i) the Straight-line method and

ii) the Reducing Balance method, and ignoring taxes;

1. Calculate the 'gain' or 'loss' on the sale that would be recorded on that day.

1. Prepare the journal entry to record the 'gain' or 'loss' on the sale of the asset.