Question

Problem 10-03A a-c

On January 1, 2020, Bridgeport Company purchased the following two machines for use in its production process.

Machine A:		The cash price of this machine was $48,000. Related expenditures included: sales tax $1,550, shipping costs $100, insurance during shipping $70, installation and testing costs $70, and $200 of oil and lubricants to be used with the machinery during its first year of operations. Bridgeport estimates that the useful life of the machine is 5 years with a $4,950 salvage 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 $180,000. Bridgeport estimates that the useful life of the machine is 4 years with a $10,150 salvage value remaining at the end of that time period.

Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. 5,125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

1.		The journal entry to record its purchase on January 1, 2020.
2.		The journal entry to record annual depreciation at December 31, 2020.

Calculate the amount of depreciation expense that Bridgeport should record for Machine B each year of its useful life under the following assumptions. (Round depreciation cost per unit to 2 decimal places, e.g. 12.25. Round final answers to 0 decimal places, e.g. 2,125.)

(1)		Bridgeport uses the straight-line method of depreciation.
(2)		Bridgeport uses the declining-balance method. The rate used is twice the straight-line rate.
(3)		Bridgeport uses the units-of-activity method and estimates that the useful life of the machine is 135,880 units. Actual usage is as follows: 2020, 54,000 units; 2021, 39,000 units; 2022, 24,000 units; 2023, 18,880 units.

Which method used to calculate depreciation on Machine B reports the highest amount of depreciation expense in year 1 (2020)?

Declining-balance method

Straight-line method

Units-of-activity method

All of the above

The highest amount in year 4 (2023)?

Declining-balance method

Straight-line method

Units-of-activity method

All of the above

The highest total amount over the 4-year period?

Declining-balance method

Straight-line method

Units-of-activity method

All of the above

Answer 1

ANS 5

49920 Jan 1, 2020 Machinery A/c ... Dr: To Cash A/C 49920 Ans1 MACHINE A (In $) cash price 48000.00 Sales tax 1550.00 Shipping cost 100.00 insurance during shipping 70.00 oil and lubricants 200.000 Total Cost 49920.00 Useful life 5 Yrs Salvage Value 4950.00 Annual Depreciation 8994.00 (Being machinery purchased on cash) Dec 31, 2020 Depreciation A/c ...Dr. 8994 To Machinery Alc 8994 (being machinery depreciated on SLM) Ans 2 MACHINE B (In $) Ans 3 Declining-balance method cash price 180000.00 Year 2 SLM 42462.50 42462.50 42462.50 42462.50 WDV (50%) 90000.00 45000.00 22500.00 11250.00 Balance (WDV) 90000.00 45000.00 22500.00 11250.00 unit of activity 54000 39000 24000 18880 DEP for Units 71533.71 51663.23 31792.76 25010.3 Total Cost 180000.00 Useful life 4 Yrs Salvage Value 10150.00 Annual Depreciation (SLM) 42462.50 Ans 4 Straight-line method 135880

Units-of-activity method