PB9-1 Computing Acquisition Cost and Recording Depreciation under Three Alternat

Question

PB9-1 Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods [LO 9-2, LO 9-3] At the beginning of the year, Oakmont Company bought three used machines from American Manufacturing, Inc. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts Machine A Machine B Machine C Amount paid for asset nstallation costs Renovation costs prior to use Repairs after production began 520.400 510,900 10,800 500 900 780 700 500 220 700 500 1.700 By the end of the first year, each machine had been operating 4,000 hours Required 1. Compute the cost of each machine Machine Machine A Machine B Machine C

Explanation / Answer

1. Cost of the machines:

2. In the books of Oakmont Company:

Depreciation : Machine A = $ ( 21,600 - 1,300) / 5 = $ 4,060.

Depreciation : Machine B = $ ( 12,100 - 1,300) / 20,000 x 4,000 = $ 2,160.

Depreciation: Machine C: = $ 12,000 x 100 / 10 percent x 2 = $ 2,400.

Cost of the Machines Machine A $ 21,600 Machine B $ 12,100 Machine C $ 12,000

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