Question

At the beginning of the year, Plummer’s Sports Center bought three used fitness machines from Advantage, Inc. The machines immediately
were overhauled, installed, and started operating. The machines were different; therefore, each had to be recorded separately in the accounts.
Machine A Machine B Machine C
Amount paid for asset $ 11,000 $ 30,000 $ 8,000
Installation costs 500 1,000 500
Renovation costs prior to use 2,500 1,000 1,500
By the end of the first year, each machine had been operating 4,800 hours.
Required:
1. Compute the cost of each machine.
Total Cost
Machine A
Machine B
Machine C
Required:
2. Prepare one entry to record depreciation expense at the end of year 1, assuming the following:
(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Estimates
Machine Life Residual Value Depreciation Method
A 5 years $1,000 Straight-line
B 60,000 hours 2,000 Units-of-production
C 4 years 1,500 Double-declining-balance

Answer 1

Answer: Please see below

Explanation:

                                                 Machine A Machine B Machine C

Amount paid for asset            $ 11,000   $ 30,000 $ 8,000

Installation costs                           500    1,000          500

Renovation costs prior to use     2,500 1,000        1,500

total cost                                  $14,000  $32,000  $10,000

Machine Life Residual Value Depreciation Method

A  5 years       $1,000           Straight-line

B 60,000 hours 2,000        Units-of-production

C 4 years      1,500      Double-declining-balance

for machne A, using Straight line Depreciation

Straight line Depreciation = total cost of asset - residual value /useful life

=14,000-1000/5= $,2,600

for machne b, using units of operation with production time = 4800

units of operation Depreciation= total cost of asset - residual value /useful life x Production time = ((32,000-2000)/60,000) x 4800= $2400

for machne b, using Double-declining-balance

Double-declining-balance depreciation = (cost of asset - accumulated depreciation/ useful life of asset) x 2 =(( $10,000- 0)/4) x2 = $5000

Journal for machine A at end of year 1

Account                                Debit        Credit

depreciation expense       $2600

accumulated depreciation                   $2,600

Journal for machine B at end of year 1

Account                                Debit        Credit

depreciation expense       $2400

accumulated depreciation                   $2,400

Journal for machine C at end of year 1

Account                                Debit          Credit

depreciation expense       $5,000

accumulated depreciation                    $5,000

Answer 2

1. The cost of each machine is computed as follows:

                                             Machine A    Machine B   Machine C

Cost of machine                    $14,000       $32,000      $10,000

2. Depreciation Expenses     $2,600         $2,400         $4,250

Journal Entries:

Debit Depreciation Expense $9,250

Credit Accumulated Depreciation:

 Machine A $2,600

 Machine B $2,400

 Machine C $4,250

To record depreciation expense for the first year.

Data and Calculations:

                                             Machine A    Machine B   Machine C

Amount paid for asset            $ 11,000      $ 30,000      $ 8,000

Installation costs                            500            1,000             500

Renovation costs prior to use   2,500            1,000           1,500

Total recognized costs          $14,000       $32,000      $10,000

Residual Value                         $1,000         $2,000        $1,500

Depreciable amount             $13,000       $30,000       $8,500

Estimated useful life                5 years        60,000 hours 4 years

Depreciation rate                 $2,600          $0.50             50% (100/4 x 2)

Depreciation methods                 S/L     Production units  Double-declining

Depreciation expense, Yr 1 $2,600         $2,400      $4,250 ($8,500 x 50%)

Calculations                   ($13,000/5) ($30,000/60,000 x 4,800)

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