Stone Enterprise Purchased a Machine on January 3, 2008

question 36

Essay

Stone Enterprise purchased a machine on January 3, 2008. The machine cost $46,000 with an estimated salvage value of $2,000 and an estimated useful life of 10 years. As a result of technological improvements, a revision of the machine's useful life and estimated salvage value was made. On January 1, 2011, the equipment was estimated to last through 2012 with an estimated value at that time of $500. Stone uses the straight-line method for depreciation.
Prepare the journal entry to record depreciation on December 31, 2011.

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Definitions:

Direct Write-off Method

A method of accounting for bad debts where uncollectible accounts are directly written off against income at the time they are deemed non-collectable.

Uncollectible Account

A receivable that a company has not been able to collect from a debtor, leading to its recognition as a bad debt expense on the income statement.

Adjusting Entry

At the conclusion of an accounting cycle, journal entries are documented to distribute earnings and expenditures to the period in which they were genuinely incurred.

Bad Debts Expense

An expense reported on a company's income statement, representing the amount of non-collectable accounts receivable during a period.