On March 31, 2019, a Machine Costing $3,000,000 Was Acquired

question 92

Essay

On March 31, 2019, a machine costing $3,000,000 was acquired. The company estimates that the asset will have an estimated useful life of five years and a residual value of $450,000. On April 1, 2024, the asset is sold for $550,000. The company uses the declining balance method at a rate of 40%. The company has a December 31 year-end. The company records partial depreciation in the year of acquisition or disposal based on the number of months the asset is available for use in the year.
Prepare the entries to record depreciation expense for 2019 and 2020, and all entries required for 2024 as they relate to this asset.

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Definitions:

Business Risk

The possibility of loss resulting from the day-to-day operations of a business, which can be influenced by numerous factors including market conditions, production costs, and management decisions.

Risk Aversion

The inclination of investors to avoid risk, preferring safer investments over those with higher potential for gains but also greater risk.

Total Risk

The complete scope of uncertainty or variability in returns on an investment, including both systematic and unsystematic risk factors.

Security Market Line

A representation in finance that shows the relationship between risk (as measured by beta) and expected return of investments, used in the capital asset pricing model.