Question

Carla Vista Limited purchased a machine on account on April 2, 2018, at an invoice price of $389,940. On April 4, it paid $2,150 for delivery of the machine. A one-year, $3,780 insurance policy on the machine was purchased on April 5. On April 18, Carla Vista paid $8,310 for installation and testing of the machine. The machine was ready for use on April 30. Carla Vista estimates the machine's useful life will be five years or 5,949 units with a residual value of $73,190. Assume the machine produces the following numbers of units each year: 934 units in 2018; 1,325 units in 2019; 1,271 units in 2020; 1,243 units in 2021; and 1,176 units in 2022. Carla Vista has a December 31 year end. Determine the cost of the machine. Cost of the machined

Answer 1

Cost of the machine	$ 400,400.00	($ 389940 + $ 2150 + $ 8310)
Residual value	$   73,190.00
Depreciable cost	$ 327,210.00
Total no. of units	5949
Dep. Expense per unit	$           55.00

Note: Cost of the machine would not include the insurance policy.

Had it been the insurance for transportation of the machinery, it'd have

been included in the cost.

	Units of	Depreciation	Accumulated	Carrying
Year	Production	Expense	Depreciation	Amount
2018	934	$ 51,372.36	$   51,372.36	$ 349,027.64
2019	1325	$ 72,878.34	$ 124,250.70	$ 276,149.30
2020	1271	$ 69,908.20	$ 194,158.90	$ 206,241.10
2021	1243	$ 68,368.13	$ 262,527.03	$ 137,872.97
2022	1176	$ 64,682.97	$ 327,210.00	$   73,190.00

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