Response to the following problem:
The following accounts appear in the general ledger of the Bruce Corp. at December 31, 2014.
GENERAL LEDGER
Machines Acct. No. 183
|
Date
2014
|
|
Description
|
Folio
|
Debit
|
Credit
|
|
Balance
|
|
Feb.
|
1
|
Machine 1
|
G121
|
6,400
|
|
DR
|
6,400
|
Accumulated Depreciation - Machines Acct. No. 193
|
Date
2014
|
|
Description
|
Folio
|
Debit
|
Credit
|
|
Balance
|
|
Dec.
|
31
|
Depreciation 2014
|
6124
|
|
500
|
CR
|
500
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
Dec.
|
31
|
Depreciation 2015
|
GJ31
|
|
1,000
|
CR
|
1,500
|
Machine 1 was estimated to have a useful life of six years, with a residual value of $400. On January 31, 2016 machine 1 was traded in for machine 2. The purchase price of machine 2 was $8,000 and Bruce Corp. received a trade-in allowance of $4,500.
Machine 2 is estimated to have a useful life of eight years, with a residual value of $1,000. The fair value of machine 1 was $4,000 at the date of the trade-in. Assume the company uses the ½ year rule to calculate depreciation expense in the year of acquisition and disposal. Depreciation account and calculate the new balance in that account.