Problem
At the beginning of the year, a company bought three new machines for its production facilities. The machines were all different so each had to be recorded separately. Below are the costs related to each purchase.
|
|
Machine A
|
Machine B
|
Machine C
|
|
Amount paid for the machine
|
14,000
|
28,500
|
11,200
|
|
Installation cost
|
600
|
1,000
|
400
|
|
Delivery cost
|
600
|
800
|
600
|
|
Insurance cost
|
450
|
600
|
400
|
At the end of the first year, each machine had been operated 5,200 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:
|
Machine
|
Life
|
Residual Value
|
Depreciation Method
|
|
A
|
6 years
|
1,000
|
Straight-line
|
|
B
|
50,000 hours
|
2,000
|
Units-of-production
|
|
C
|
5 years
|
1,000
|
Double-declining-balance
|