Question

hello can anyone help me to solve it (p.9.3)

P9.3 (LO 2) On January 1, 2020, Pele Industries purchased the following two machines for use in its production process. Machine A: The cash price of this machine was R$35,000. Related expenditures included: sales tax R$2,200, shipping costs R$ 150, insurance during shipping R$80, installation and test- ing costs R$ 70, and R$100 of oil and lubricants to be used with the machinery during its first year of operations. Pele estimates that the useful life of the machine is 5 years with a R$5,000 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 th The recorded cost of this machine was R$80,000. Pele estimates that the useful life of the machine is 4 years with a R$5,000 residual value remaining at the end of that time period. Instructions a. Prepare the following for Machine A. 1. The journal entry to record its purchase on January 1, 2020. 2. The journal entry to record annual depreciation at December 31, 2020. b. Calculate the amount of depreciation expense that Pele should record for Machine B each year of its useful life under the following assumptions. 1. Pele uses the straight-line method of depreciation. 2. Pele uses the declining-balance method. The rate used is twice the straight-line rate. 3. Pele uses the units-of-activity method and estimates that the useful life of the machine is 125,000 units. Actual usage is as follows: 2020, 42,000 units; 2021, 37,000 units; 2022, 28,000 units; and 2023, 18,000 units. c. Which method used to calculate depreciation on Machine B reports the highest amount of deprecia- tion expense in year 1 (2020)? The highest amount in year 4 (2023)? The highest total amount over the 4-year period?

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
Part a1
	Purchase Price		$           35,000
	Sales Tax		$             2,200
	Shippint cost		$                 150
	Insurance on Shipping		$                   80
	Installation and Testing		$                   70
	Total Cost of Machine		$           37,500
Date	Account	Debit	Credit
Jan 1 2020	Equipment	$                                           37,500
	Cash		$           37,500
Part a2	Total Cost of Machine		$           37,500
	Less: Residual Value		$           (5,000)
	Depreciable Value		$           32,500
	Life		5 Years
	Annual Depreciation		$             6,500
Date	Account	Debit	Credit
Dec 31 2020	Depreciation Expense	$                                             6,500
	Accumulated Depreciation		$             6,500
Part b1	Annual Depreciation		$           80,000
	Less: Residual Value		$           (5,000)
	Depreciable Value		$           75,000
	Life		4 Years
	Annual Depreciation		$           18,750
Part b2
Year	Book value at beginning	DDB Rate 100%/4 Years*2	Annual Dep	Acc Dep
2020	$                                                      80,000	50%	$           40,000	$    40,000
2021	$                                                      40,000	50%	$           20,000	$    60,000
2022	$                                                      20,000	50%	$           10,000	$    70,000
2023	$                                                      10,000	50%	$             5,000	$    75,000
Part b3
	Depreciaton per unit	$75,000/125,000 Units	$               0.60
Year
2020	42,000*$0.60	$                                           25,200
2021	37,000*$0.60	$                                           22,200
2022	28,000*$0.60	$                                           16,800
2023	18,000*$0.60	$                                           10,800
Part c
	Declining Balance reported highest in first year
	Straight line method reported highest in last year
	Total for 4 year will remain same in all four years