Part 1. A machine that cost \(\$ 75,000\), having a five-year life and an estimated \(\$ 10,500\) salvage value, was installed in Blake Company's factory. The factory management estimated the machine would produce 150,000 units of product during its life. It actually produced the following numbers of units: year 1, 21,000; year 2, 33,000; year 3, 30,000; year 4, 28,500; and year 5, 37,500.

\section*{Required}

1. Prepare a calculation showing the number of dollars of this machine's cost that should be charged to depreciation over its five-year life.

2. Prepare a form with the following column headings:

Then show the depreciation for each year and the total depreciation for the machine under each depreciation method. Use twice the straight-line rate for the declining-balance method.
Part 2. Craft Company purchased a used machine for \(\$ 17,100\) on January 3. The next day, it was repaired at a cost of \(\$ 2,025\) and was installed on a new platform that cost \(\$ 1,575\). It was estimated the machine would be used for three years and would then have a \(\$ 2,700\) salvage value. Depreciation was to be charged on a straight-line basis. A full year's depreciation was charged on December 31, at the end of the first year of the machine's use; and on September 1, in its second year of use, the machine was retired from service.
\section*{Required}
1. Prepare general journal entries to record the purchase of the machine, the cost of repairing it, and its installation. Assume cash was paid in each case.
2. Prepare entries to record depreciation on the machine on December 31 and on September 1.
3. Prepare entries to record the retirement of the machine under each of the following unrelated assumptions:

(a) the machine was sold for \(\$ 12,000\); \((b)\) it was sold for \(\$ 6,900\); and

(c) it was destroyed in a fire and the insurance company paid \(\$ 6,525\) in full settlement of the loss claim.

Transcribed Image Text:

Year Straight Line Units of Production Declining Sum-of-the- Balance Year's Digits