Composite Depreciation
Response to the following problem:
The Wilcox Company acquires four machines that have the following characteristics:
|
Machine
|
Cost
|
Estimated
Residual Value
|
Estimated
Service Life
|
|
A
|
$26,000
|
$2,000
|
6 years
|
|
8
|
19,000
|
1,000
|
9
|
|
C
|
30,000
|
5,000
|
5
|
|
D
|
28,000
|
-
|
7
|
Required
1. Prepare journal entries to record the acquisition and the first year's depreciation, assuming that the composite method is used on a straight-line basis.
2. If the company sells machine B after four years for $10,000, prepare the journal entry.
3. What arguments may be used to support the composite depreciation method?