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 Installation costs Renovation costs prior to use Repairs after production began $7,650 250 1,600 410 $9,400 550 1,150 350 $25,700 650 1,250 360 By the end of the first year, each machine had been operating 2,000 hours. Required 1. Compute the cost of each machine 2. 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 5 years 10,000 hours 6 years $ 200 600 900 Straight-line Units-of-production Double-declining-balance Complete this question by entering your answers in the tabs below Required 1Required 2 Compute the cost of each machine. Cost o Machine A Machine B Machine C Required 1Required 2 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). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.) show less ▲ View transaction list Journal entry worksheet Record the depreciation expense for the three used machines at the end of year 1. Note: Enter debits before credits. Transaction General Journal Debit Credit

Answer 1

1. Computation of Cost of each Machine: Machine C 25,700.00 S 9,400.00 550.00 1,250.00 S1,150.00 27,600.00 S 11,100.00 Machine A Machine B Amount Paid For Asset Installation Costs Renovation Costs Prior to use Total Cost 7,650.00 S 250.00 S 1,600.00 S 9,500.00 S 650.00 S 2. Calculation of Depreciation Expense for Year 1: Machine A: Straight Line Method of Depreciation (Cost-Salvage Value)/Useful Life = ($9500-$200)/5 years = 1,860.00 Machine B: Units of Production Method of Depreciation (Cost - Salvage Value) x Units Produced /Total Estimated Units for entire life of asset ($27600-S600) x 2000/10000 5,400.00 Machine C: Double Declining Balance Depreciation Rate under SLM = 1 /Useful Life 1/6 = 16.67% Depreciation Rate under Double Declining Balance Method-2 x SLM Rate-2x 16.67%-33.33% Depreciation Expense-(Cost-Accumulated Depreciation) x DDB Rate-$11,100 x 33.33% 3,699.63 or S3700

Journal Entries Debit Post. Ref. Date Account Title and Explaination Credit Depreciation Expense - Machine A Depreciation Expense Machine B Depreciation Expense - Machine C S 1,860.00 S5,400.00 $3,700.00 Accumulated Depreciation - Machine A Accumulated Depreciation - Machine B Accumulated Depreciation - Machine C $1,860.00 S5,400.00 S3,700.00 To record Depreciation Expense for vear 1)