On April 1, 20X1, Chang and Chang Inc. invested in a new machine to manufacture soccer balls. The machine is expected to manufacture 1,400,000 balls over its life of three years and then it will be scrapped. The machine cost $50,000 including normal and necessary costs of setting it up. Chang will use units-of-production to depreciate the machine.
a. Record depreciation for 20X1 and 20X2 assuming that 450,000 balls were manufactured and sold in 20X1 and 600,000 were manufactured and sold in 20X2.
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b. On January 1, 20X3, Chang decides to get out of the soccer ball business, and sells the machine for $15,000. Record this journal entry.