Question

Question 1

On January 1, 2017, Sage SA purchased the following two machines for use in its production process.

Machine A:		The cash price of this machine was R$36,700. Related expenditures included: sales tax R$4,000, shipping costs R$130, insurance during shipping R$60, installation and testing costs R$100, and R$160 of oil and lubricants to be used with the machinery during its first year of operations. Sage estimates that the useful life of the machine is 5 years with a R$5,500 residual value remaining at the end of that time period. Assume that the straight-line method of depreciation is used.
Machine B:		The recorded cost of this machine was R$150,400. Sage estimates that the useful life of the machine is 4 years with a R$9,400 residual value remaining at the end of that time period.

repare the following for Machine A. (Round answers to 0 decimal places, e.g. 2,125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

1.		The journal entry to record its purchase on January 1, 2017.
2.		The journal entry to record annual depreciation at December 31, 2017.

No.	Account Titles and Explanation	Debit	Credit
1.
2.

Calculate the amount of depreciation expense that Sage should record for Machine B each year of its useful life under the following assumptions. (Round answers to 0 decimal places, e.g. 2,125. Round cost per unit to 2 decimal place, e.g. 1.25.)

(1)		Sage uses the straight-line method of depreciation.
(2)		Sage uses the declining-balance method. The rate used is twice the straight-line rate.
(3)		Sage uses the units-of-activity method and estimates that the useful life of the machine is 122,810 units. Actual usage is as follows: 2017, 44,000 units; 2018, 35,750 units; 2019, 25,880 units; 2020, 17,180 units.

		2017		2018		2019		2020
Straight-line method		R$		R$		R$		R$
Declining-balance method		R$		R$		R$		R$
Units-of-activity method		R$		R$		R$		R$

Which method used to calculate depreciation on Machine B reports the highest amount of depreciation expense :

In Year 1 (2017)
In Year 4 (2020)
Over the 4-year period

Answer 1

A. E Debit ($) Credit ($) $191,390 Account titles and explanations 2 1 Date 01-Jan-17 Equipment 3 $191,390 Cash 5 $72,428 31-Dec-17 Depreciation expense 6 2 $72,428 Accumulated depreciation 7 N

A E 1 Account titles and explanations Debit ($) Credit ($) 2 1 Date Equipment 42736 36700+4000+130+60+100+150400 Cash D3 5 -(D3-5500)/5)+((150400-9400)/4) Depreciation expense 6 2 43100 Accumulated depreciation 7 -D6 8 N

Н J K L Year Total 2020 2017 2018 2019 Straight-line method Declining-balance method Units-of-activity method $35,250.0 $141,000.0 $9,400.0 $141,000.0 $21,039.6 $150,400.0 $35,250.0 $35,250.0 $35,250.0 $75,200.0 $37,600.0 $18,800.0 $53,884.9 $43,781.5 $31,694.1 Method used to calculate depreciation on machine B reports highest: In Year 1 (2017) In Year 4 (2020) Over the 4-year period Declining-balance method Straight-line method Units-of-activity method $75,200.0 $35,250.0 $150,400.0

G Year 2018 (150400-9400)/4 150400-H4)*(1/4)*2 |2019 150400-9400)/4 2020 (150400-9400)/4 (150400-H4-14)*(1/4)*2 =(150400-H4-14-J4)*(1/4)*2 -SUM(H4:K4) Total 2017 Straight-line method Declining-balance method 150400*(1/4)*2) Units-of-activity method (150400-9400)/4 =SUM(H3:K3) -150400*(44000/122810) -150400*(35750/122810) =150400*(25880/122810) 150400*(17180/122810) =SUM(H5:K5) Method used to calculate depreciation on machine B reports highest: In Year 1 (2017) In Year 4 (2020) Over the 4-year period Declining-balance method Straight-line method Units-of-activity method 75200 35250 150400