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Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods At the beginning of the year, Young Company bought three used machines from Vince, Inc.

Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods

At the beginning of the year, Young Company bought three used machines from Vince, Inc. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts.

Machine A Machine B Machine C
Amount paid for asset $ 8,450 $ 27,300 $ 11,000
Installation costs 450 850 750
Renovation costs prior to use 3,200 1,600 1,150
Repairs after production began 570 520 750

By the end of the first year, each machine had been operating 5,000 hours.

1. Compute the cost of each machine.

Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following:(Do not round intermediate calculations. 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 5 years $ 600 Straight-line
B 30,000 hours 800 Units-of-production
C 6 years 1,500 Double-declining-balance

TIP: Remember that the formula for double-declining-balance uses cost minus accumulated depreciation (not residual value).

Journal Entry Worksheet

Record the depreciation expense for the three used machines at the end of year 1.

Transaction General Journal Debit Credit
1

*Enter debits before credits

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