y D Review Assignments 9 non Not secure l ezto.mheducation.com/hm.tpx Assignment

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y D Review Assignments 9 non Not secure l ezto.mheducation.com/hm.tpx Assignments 9 Question 8 (of 9) value 10.00 points At the beginning of the year, Grillo Industries bought three used machines from Freeman Incorporated. 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 Cost of the asset Installation costs Renovation costs prior to use Repairs after production began700 S10,000 $39,200 $23,000 2,200 3200 1,700 3,100 2,700 600 800 600 By the end of the first year, each machine had been operating 8,000 hours. Required 1. Compute the cost of each machine S 11,4 S 45 Cs 28,400 2. Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following (f O Type here to search no entry is required for a transaction/event, select "No Jo urnal Entry Required" in the first

Explanation / Answer

Answer to Part 1

Cost till put to use will be capitalised and after commercial productio will be considered as revenue expenditure.

Answer to Part 2

Working Note

Machine A Depreciation = (Cost - Residual Value) / Life

= (11400 - 2000) / 5

= $1880

Machine B Depreciation = (Cost - Residual Value) x Hours used / total life in hours

= (45000 - 1600) x 8000 / 20000

= $17360

Machine C Depreciation = (Cost - Accumulated Depreciation ) x 2 x SLM Rate

= ((28400 - 0) x 2 x 9.47%

= $5380

SLM Rate for C = [(Cost - Residual Value) / Life of Asset] / Cost of the asset

=[(28400 - 1500) / 10] / 28400

= 9.47%

Particulars Machine A Machine B Machine C Cost of the asset    10,000.00    39,200.00    23,000.00 Add: Installation costs          800.00      3,100.00      2,200.00 Add: Renovation cost prior to use          600.00      2,700.00      3,200.00 Cost of Machine    11,400.00    45,000.00    28,400.00

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