Problem 10-3A No. Account Titles and Explanation Debit Credit SHOW LIST OF ACCOU
ID: 2583432 • Letter: P
Question
Problem 10-3A
No.
Account Titles and Explanation
Debit
Credit
SHOW LIST OF ACCOUNTS
Depreciation Expense
2017
2018
2019
2020
SHOW LIST OF ACCOUNTS
Problem 10-3A
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 $41,000. Related expenditures included: sales tax $1,650, shipping costs $200, insurance during shipping $50, installation and testing costs $90, and $200 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 $4,400 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 $9,750 salvage value remaining at the end of that time period. Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. 5,125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
1. The journal entry to record its purchase on January 1, 2017. 2. The journal entry to record annual depreciation at December 31, 2017.
No.
Account Titles and Explanation
Debit
Credit
1. 2.SHOW LIST OF ACCOUNTS
Calculate the amount of depreciation expense that Evers should record for Machine B each year of its useful life under the following assumptions. (Round depreciation cost per unit to 2 decimal places, e.g. 12.25. Round final answers to 0 decimal places, e.g. 2,125.)(1) Evers uses the straight-line method of depreciation. (2) Evers uses the declining-balance method. The rate used is twice the straight-line rate. (3) Evers uses the units-of-activity method and estimates that the useful life of the machine is 175,900 units. Actual usage is as follows: 2017, 59,000 units; 2018, 48,000 units; 2019, 37,000 units; 2020, 31,900 units.
Depreciation Expense
2017
2018
2019
2020
Straight-line method $ $ $ $ Declining-balance method $ $ $ $ Units-of-activity method $ $ $ $SHOW LIST OF ACCOUNTS
Which method used to calculate depreciation on Machine B reports the highest amount of depreciation expense in year 1 (2017)?Declining-balance methodStraight-line methodUnits-of-activity methodAll of the above
The highest amount in year 4 (2020)?
Declining-balance methodStraight-line methodUnits-of-activity methodAll of the above
The highest total amount over the 4-year period?
Declining-balance methodStraight-line methodUnits-of-activity methodAll of the above
Explanation / Answer
Machine A Journal Entry Date Accounting titles & Explanations Debit Credit Equipment 42,990 cash 42,990 Depreciation expense 7700 Accumulated depreciation 7,700 (42900-4400)/5 Machine B 2017 2018 2019 2020 Straight -line method 42563 42563 42563 42561 170250 Declining balance method 90,000 45,000 22500 12,750 170,250 units of activity method 57230 46560 35890 30570 170250 depreciation under straight line is ( (180,000-9750)/4 42562.5 Double declining rate = 1/4*2=50% units of activity method rate =(180000-9750)/175900 0.97 in year 2017 - double declining in year 4 - straight line over 4 year period -all of the above
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