Wayside Machine Tool Company purchased a $600,000 welding machine to use in prod

Question

Wayside Machine Tool Company purchased
a $600,000 welding machine to use in production of large machine tools and
robots. Th e welding machine was expected to have a life of 10 years and a salvage
value at time of disposition of $60,000. Th e company uses straight-line depreciation.
During its fi rst operating year, the machine produced 600 machines of which 480
were sold.
a. What part of the $600,000 machine cost expired?
b. Where would each of the amounts related to this machine appear on the fi nancial
statements at the end of the fi rst year of operations?

Explanation / Answer

Income statement

Slaes

480 machines

cost of good sold

xxxx

Gross profi

XXX

less:

operating expense:

Depreciation

54000

Liabilities

$

Assets

$

Fixed costs:

Machine

546000

Closing stock

120 machines

Date

Debit

credit

At the end of the year

Depreciation

54000

Machine

54000

Income statement

Slaes

480 machines

cost of good sold

xxxx

Gross profi

XXX

less:

operating expense:

Depreciation

54000

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