(a) No. Account Titles and Explanation Debit Credit On January 1, 2017, Evers Co
ID: 2467228 • Letter: #
Question
(a)
No.
Account Titles and Explanation
Debit
Credit
On January 1, 2017, Evers Company purchased the following two machines for use in its production process.Machine A: The cash price of this machine was $48,000. Related expenditures included: sales tax $1,700, shipping costs $150, insurance during shipping $80, installation and testing costs $70, and $100 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 $5,000 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 $180,000. Evers estimates that the useful life of the machine is 4 years with a $10,000 salvage value remaining at the end of that time period.
Explanation / Answer
Machinery A
Cash price of machine = $48,000
Add- Sales tax = $1,700
Add- shipping costs =$150
Add- Insurance during shipping= $80
Add- Installation and testing costs= $70
Machine Total value to be recorded = $50,000
Salvage value = $5,000
Life of machine = 5 years
Depreciation as per SLM = (cost of machine – scrap) / life of asset
= ($50000 - $5000) / 5
= $9000
N0.
Account titles and explanation
Debit
Credit
1.
Machinery
$50000
Cash
$48000
Sales tax
$1700
Shipping cost
$150
Insurance
$80
Installation and testing costs
$70
2.
Depreciation
$9000
Machinery
$9000
MACHINERY B
Machine Total value to be recorded = $180,000
Salvage value = $10,000
Life of machine = 4 years
Depreciation as per SLM = (cost of machine – scrap) / life of asset
= ($180,000 - $10,000) / 4
= $42,500
N0.
Account titles and explanation
Debit
Credit
1.
Machinery
$180,000
Cash
$48000
2.
Depreciation
$42,500
Machinery
$42,500
N0.
Account titles and explanation
Debit
Credit
1.
Machinery
$50000
Cash
$48000
Sales tax
$1700
Shipping cost
$150
Insurance
$80
Installation and testing costs
$70
2.
Depreciation
$9000
Machinery
$9000
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