Problem 9-3A (Part Level Submission) (a) Problem 9-3A (Part Level Submission) On

Question

Problem 9-3A (Part Level Submission)

(a)

Problem 9-3A (Part Level Submission)

On January 1, 2014, Thao Company purchased the following two machines for use in its production process.

Machine A: The cash price of this machine was $52,500. Related expenditures included: sales tax $2,900, shipping costs $110, insurance during shipping $80, installation and testing costs $90, and $180 of oil and lubricants to be used with the machinery during its first year of operations. Thao estimates that the useful life of the machine is 5 years with a $5,600 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 $241,600. Thao estimates that the useful life of the machine is 4 years with a $15,100 salvage value remaining at the end of that time period

Explanation / Answer

Total machine cost = purchase price + sales tax + shipping cost + insurance + installation

= 52500 + 2900 + 110 + 80 + 90

= 55680

1)

Hournal entry is

Dr Machinery $55680
Cr cash $55680

2)

Depricable cost = recorded cost - salvage value = 55680 - 5600 = 50080

Annual depriciation = 50080/5 = 10016

journal entry is

Dr Depreciation Expense $10016
Cr Accumulated Depriciation $10016

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