On March 20, 2011, FineTouch Corporation purchased two machines at auction for a combined total cost of $236,000. The machines were listed in the auction catalogue at $110,000 for machine X and $155,000 for machine Y. Immediately after the auction, FineTouch had the machines professionally appraised so it could increase its insurance coverage. The appraisal put a fair value of $105,000 on machine X and $160,000 on machine Y.
On March 24, FineTouch paid a total of $4,500 in transportation and installation charges for the two machines. No further expenditures were made for machine X, but $6,500 was paid on March 29 for improvements to machine Y. On March 31, 2011, both machines were ready to be used.
The company expects machine X to last five years and to have a residual value of $3,800 when it is removed from service, and it expects machine Y to be useful for eight more years and have a residual value of $14,600 at that time. Due to the different characteristics of the two machines, different depreciation methods will be used for them: machine X will be depreciated using the double-declining-balance method and machine Y using the straight-line method.
Required:
Prepare the journal entries to record the following:
a. The purchase of each machine
b. The transportation, installation, and improvement costs for each machine
c. The depreciation expense to December 31, 2011, for each machine