On January 1, 2014, Evers Company purchased the following two machines for use i
ID: 2462029 • Letter: O
Question
On January 1, 2014, Evers Company purchased the following two machines for use in its production process.
MACHINE A; The cash price of this machine was $51,500. Related expenditures included: sales tax $3,200, shipping costs $150, insurance during shipping $100, installation and testing costs $90, and $190 of oil and lubricants to be used with the machinery during its first year of operations. Evers estimates that the useful life of the machine is 5 years with a $5,200 salvage 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 this machine was $193,600. Evers estimates that the useful life of the machine is 4 years with a $11,100 salvage value remaining at the end of that time period.
Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. $2,125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
1. The journal entry to record its purchase on January 1, 2014.
2. The journal entry to record annual depreciation at December 31, 2014
Calculate the amount of depreciation expense that Evers should record for machine B each year of its useful life under the following assumptions. (Round depreciation cost per unit to 2 decimal places, e.g. 12.25. Round final answers to 0 decimal places, e.g. $2,125.)
1. Evers uses the straight-line method of depreciation.
2. Evers uses the declining-balance method. The rate used is twice the straight-line rate
3. Evers uses the units-of-activity method and estimates that the useful life of the machine is 125,000 units. Actual usage is as follows: 2014, 45,000 units; 2015, 35,000 units; 2016, 25,000 units; 2017, 20,000
2014
2015
2016
2017
2014
2015
2016
2017
Straight-line method $ $ $ $ Declining-balance method $ $ $ $ Units-of-activity method $ $ $ $Explanation / Answer
A.
Machine A
Cost of machine=51500+3200+150+100+90=55040
Excluded oil and lubricant expenses
1. journal entry to record its purchase on January 1, 2014.
Debit credit
Machine A $55040
Cash $55040
2
Depreciation=(55040-5200)/5=9968
Journal entry to record annual depreciation at December 31, 2014
Debit credit
Depreciation expense-machine A $9968
Accumulated depreciation. $9968
B.
Machine B
Depreciation under
1 straight line =(193600-11100)/4=$45625
2.declining method
Year 1=193600*50%=96800 depreciation
Year2=96800*50%=$48400
Year3=48400*50%=24200
Year 4=24200*50%=12100
3.units activity method
Rate per unit =(193600-11100)÷125000=1.46
Year1=45000*1.46=65700
Year2=35000*1.46=51100
Year3=25000*1.46=36500
Year 4 =20000*1.46=29200
2014 2015 2016 2017 Straight line 45625 45625 45625 45625 Declining balance method 96800 48400 24200 12100 Units of activity method 65700 51100 36500 29200Related Questions
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