At the beginning of the year, Young Company bought three used machines from Vinc

Question

At the beginning of the year, Young Company bought three used machines from Vince, Inc. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Machine Machine Machine A Amount paid for S8,350 $27,100 $10,800 650 450 2,050 700 750 Installation costs Renovation costs 350 3,000 pnor to use Repairs after 550 500 production began By the end of the first year, each machine had been operating 3,000 hours. Required: 1. Compute the cost of each machine.

Explanation / Answer

Cost of machine = amount paid for an assets + installation cost + renovation cost prior to use

1) Cost of machine A= $8350+ $350 +$3000=$11,700
Cost of machine B= $27100+$750 +$1450 =$29,300
Cost of machine C= $10,800+ $650+$2050= $13,500

2) jornal entries
       
     Depreciation expenses A/C Dr. $2,260
         To accumulated depreciation A/C -machine A $2,260
(Being depreciation recognised- $11700-$400/5= $2260)

      Depreciation expenses A/C Dr. $8,670
        To accumulated depreciation A/C - machine B $8,670
(Being depreciation recognised - $29300-$400/10000hours=2.89×3000 hours=$8670)

        Depreciation expenses A/C Dr. $ 4,499.55
             To accumulated depreciation A/C $4,499.55
(Being depreciation recognised - straight line depreciation percentage =1/6=.16 or 16.66%
Depreciation rate=16.66%×2 ==33.33%
Depreciation for the year = $13500×33.33%×12/12= $4499.55)

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