Question

At the beginning of the year, Young Company bought three used machines from Vince, Inc. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Machine A Machine B Machine C Amount paid for asset $ 7,650 $ 25,700 $ 9,400 Installation costs 250 650 550 Renovation costs prior to use 1,600 1,250 1,150 Repairs after production began 410 360 350 By the end of the first year, each machine had been operating 2,000 hours. Required: Compute the cost of each machine. Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following: TIP: Remember that the formula for double-declining-balance uses cost minus accumulated depreciation (not residual value). Estimates Machine Life Residual Value Depreciation Method A 5 years $ 200 Straight-line B 10,000 hours 600 Units-of-production C 6 years 900 Double-declining-balance

Answer 1

1	Compute the cost of each machine
	Machine A	$9,500
	Machine B	$27,600
	Machine C	$11,100
	Note: Repairs cost, after production began, should not be capitalized
2
Transaction	General Journal	Debit	Credit
1	Depreciation Expense
	Accumulated Depreciation - Machine A		$1,860
	Accumulated Depreciation - Machine B		$5,400
	Accumulated Depreciation - Machine C		$3,700
Working	Calculation of Depreciation
	Machine A	$1,860
	($9,500 - $200)/5 years
	Machine B	$5,400
	($27,600 - $600) x 2,000/10,000
	Machine C	$3,700
	($11,100 - $0) x 33.33%