Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2012, Tiggy Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine

On January 1, 2012, Tiggy Company purchased the following two machines for use in

its production process.

Machine A: The cash price of this machine was $38,000. Related expenditures included: sales tax $1,700, shipping costs $150, insurance during shipping $80, installation and testing costs $70, and $100 of oil and lubricants to be used with the machinery during its first year of operations. Tiggy estimates that the useful life of the machine is 5 years with a $5,000 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 $160,000. Tiggy estimates that the useful life of the machine is 4 years with a $10,000 salvage value remaining at the end of that time period.

Instructions

a) Prepare the following for Machine A.

1) The journal entry to record its purchase on January 1, 2012.

2) The journal entry to record annual depreciation at December 31, 2012.

b) Calculate the amount of depreciation expense that Tiggy should record for machine B each year of its useful life under the following assumptions.

1) Tiggy uses the straight-line method of depreciation.

2) Tiggy uses the declining-balance method. The rate used is twice the straight-line rate.

3) Tiggy uses the units-of-activity method and estimates that the useful life of the machine is 125,000 units. Actual usage is as follows: 2012, 45,000 units; 2013, 35,000 units; 2014, 25,000 units; 2015, 20,000 units.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

10th Edition

1119491630, 978-1119491637, 978-0470534793

More Books

Students also viewed these Accounting questions

Question

13.6 Explain how to set up aflexible benefits program.

Answered: 1 week ago

Question

13.2 Describe five government-mandated benefits.

Answered: 1 week ago