CP9-1 Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods Lo 2, LO 9-3) At the beginning of the year, Young Company bought two 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 Amount paid for asset $7,600 $25,600 Installation costs 200 600 Renovation costs prior to use 1,500 1,200 Repairs after production began 400 35 By the end of the first year, each machine had been operating 7,000 hours Required: 1. Compute the cost of each machine 2. Prepare the Journal entry to record depreciation expense at the end of year 1, assuming the following Estimates Machine Life Residual Value Depreciation Method 5 years $ 500 Straight-Line 40,000 hours 1.000 Units-of-production B Required 1 Required 2 Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following: TIP: Remember that the formula for double-declining-balance uses cost minus accumulated depreciation (not residual value). (If no entry is required for a transaction/event, select "No Journal Entry Required in the first account field. Do not round intermediate calculations.) Show less View transaction list Journal entry worksheet 1 es Record the depreciation expense for the three used machines at the end of year 1. Note: Enter debits before credits Transaction General Journal Debit Credit 1 Record entry Clear entry View general journal E9-6 Computing Depreciation under Alternative Methods [LO 9-3] Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $22,000. The estimated useful life was five years and the residual value was $2,000. Assume that the estimated productive life of the machine is 10,000 units Expected annual production was year 1, 2,000 units, year 2, 3,000 units; year 3, 2,000 units: year 4.2,000 units; and year 5, 1.000 units Required: 1. Complete a depreciation schedule for each of the alternative methods. a. Straight-line. b. Units-of-production 2. Which method will result in the highest net income in year 2? Does this higher net income mean the machine was used more efficiently under this depreciation method? Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2A Reg 28 Complete a depreciation schedule for Straight-line method. (Do not round Intermediate calculations.) Income Statement Depreciation Expense Balance Sheet Accumulated Depreciation Year Cost Book Value At acquisition 1 $ 4,000 s 4.000 $ 2 $ $ 22,000 $ 22.000 $ 22,000 $ 22,000 $ 4,000 $ 8.000 $ 12,000 $ 18,000 14,000 10,000 6,000 3 $ 4,000 s 4 $ 4,000 $ 16.000 s 20,000 s 5 $ 4.000 $ 22,000 $ 2,000 Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Req 2A Req 2B Complete a depreciation schedule for Units-of-production method. (Do not round in Balance Sheet Income Statement Depreciation Expense Year Cost Accumulated Depreciation Book Value At acquisition 1 4,000 $ 4,000 $ 18,000 2 $ $ $ $ 22,000 $ 22,000 $ 22,000 $ 10,000 $ 6,000 $ 4,000 $ 12,000 3 14,000 $ $ 4 $ 4,000 $ 2,000 $ 22,000 $ 22,000 $ 18,000 20,000 $ 8,000 4,000 2,000 5 $