The New Times Company purchased a new machine on January 1, 2007. The new machine cost $120,000, had an estimated useful life of five years, and an estimated salvage value of $15,000 at the end of its useful life. It was expected that the machine would produce 210,000 widgets during its useful life.

The company sold the machine on July 1, 2009, for $45,000.

Prepare the journal entry to record the updating of the depreciation to the date of sale for straight-line depreciation.

The question asks me to update the depreciation to the date of the sale, does that mean I'm adjusting the entry.. or do I just prepare a journal entry for depreciation?

First you have to calculate depreciation for each year.

Take the cost of the equipment minus the salvage value to get your depreciable base. Next take this number and divide it by the number of years of useful life to get your depreciation per year.

The journal entries for years 2007 and 2008 depreciation should have been done so you have to do the journal entry for 2009 to get the depreciation up to date prior to the sale. Since 2009 is a partial year take the full year depreciation times 6 months of use divided by 12 months to get 6 months of depreciaiton. Or you could just divide your yearly depreciation by 2 to get the half year of depreciation.

Now you can do the journal entry to get depreciation up to date prior to the sale of the equipment.