Webb Net manufacturing purchased a new net weaving machine on January 1, 2009, for $500,000. The new

Question:

Webb Net manufacturing purchased a new net weaving machine on January 1, 2009, for $500,000. The new machine has an estimated life of five years and an estimated salvage value of $100,000. It is company policy to use straight-line depreciation for all of its machines.

REQUIRED:

a. Assume that Webb Net Manufacturing sells this machine on January 1, 2012, for $325,000. Prepare the entry to record this transaction.

b. Assume that Webb Net Manufacturing sells this machine on June 30, 2012, for $320,000. Prepare the entry or entries to record this transaction.

c. Assume that Webb Net Manufacturing trades in this machine for a tract of land on January 1, 2012. The list price of the land is $250,000, and it has an appraised value of $210,000. The company is granted a trade-in allowance on the machine is appraised at $75,000. Prepare the entry to record the trade-in, assuming that the land is valued as follows:

(1) The FMV of the assets received.

(2) The FMV of the assets given up.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...