At the beginning of the year, Plummer\'s Sports Center bought three used fitness

Question

At the beginning of the year, Plummer's Sports Center bought three used fitness machines from Advantage, Inc. The machines immediately were overhauled, installed, and started operating. The machines were different; therefore, each had to be recorded separately in the accounts.

By the end of the first year, each machine had been operating 6,600 hours.

(Prepare the entry to record depreciation expense at the end of year 1, assuming the following. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

ESTIMATES

Machine A Machine B Machine C Amount paid for asset $ 18,900 $ 38,100 $ 11,750 Installation costs 1,100 1,900 1,900 Renovation costs prior to use 4,300 1,800 2,100

By the end of the first year, each machine had been operating 6,600 hours.

(Prepare the entry to record depreciation expense at the end of year 1, assuming the following. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

ESTIMATES

Machine Life Residual Value Depreciation Method A 8 years $2,700 Straight-line B 77,000 hours 3,300 Units-of-production C 5 years 1,700 Double-declining-balance

Explanation / Answer

Journal Debit Credit Depreciation expenses 12300 Accumulated depreciation - Machine A 2700 Accumulated depreciation - Machine B 3300 Accumulated depreciation - Machine C 6300 (to record depreciation expenses) Note 1 - Depreciation expenses for Machine A Depreciation under straight-line method = (cost of asset-Salvage value)/Useful life = (18900+1100+4300-2700)/8 = $2700 Note 2 - Depreciation expenses for Machine B Depreciation under Units of production method = ((cost of asset-Salvage value)/total estimated operating hours)*actual operating hours of the year = ((38100+1900+1800-3300)/77000)*6600 = $3300 Note 3 - Depreciation expenses for Machine C Depreciation under double-declining-balance method = (cost of asset-Salvage value)*Rate of Depreciation under straight-line method*2 Depreciation under straight-line method = (11750+1900+2100-1700)/5 = $2810 Rate of Depreciation under straight-line method = $2810/(11750+1900+2100-1700) = 20% = (11750+1900+2100)*20%*2 = $6300

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