1) Cost of each machine | |||||
machine A | Cost of machine | ||||
amount paid for assets | 19600 | ||||
add: installation cost | 300 | ||||
add: renovation cost prior to use | 100 | ||||
Total | 20000 | ||||
machine B | Cost of machine | ||||
amount paid for assets | 10100 | ||||
add: installation cost | 500 | ||||
add: renovation cost prior to use | 300 | ||||
Total | 10900 | ||||
machine C | Cost of machine | ||||
amount paid for assets | 9800 | ||||
add: installation cost | 200 | ||||
add: renovation cost prior to use | 600 | ||||
Total | 10600 | ||||
2) journal entries | |||||
particulars | Debit | Credit | |||
Depreciation expense | 9000 | ||||
accumulated depreciation-machine A | 2700 | ||||
accumulated depreciation-machine B | 1000 | ||||
accumulated depreciation-machine C | 5300 | ||||
Calculation of Accumulated depreciation | |||||
Machine A = cost-residual value/life | |||||
Machine A = (20000-1100)/7year = 2700 | |||||
Machine B = (cost-residual value)*operating hour of machine/estimated life | |||||
Machine B = (10900-900)*4000/40000 = 1000 | |||||
Machine C = cost of machine *1/useful life*2 | |||||
Machine C = 10600*1/4*2 = 5300 |
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