Question
On January 1, 2014, Thao Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine
On January 1, 2014, Thao Company purchased the following two machines for use in its production process.
Machine A: | The cash price of this machine was $50,700. Related expenditures included: sales tax $3,100, shipping costs $200, insurance during shipping $110, installation and testing costs $80, and $150 of oil and lubricants to be used with the machinery during its first year of operations. Thao estimates that the useful life of the machine is 5 years with a $6,000 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 $96,000. Thao estimates that the useful life of the machine is 4 years with a $6,000 salvage value remaining at the end of that time period. |
Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. $2,125.)
1) The journal entry to record its purchase on January 1, 2014. |
2) The journal entry to record annual depreciation at December 31, 2014.
Then calculate the amount of depreciation expense that Thao should record for Machine B each year of its useful life under the following assumptions. (Round answers to 0 decimal places, e.g. $2,125. Round cost per unit to 2 decimal place, e.g. 1.25.)
1) Thao uses the straight-line method of depreciation.
2) Thao uses the declining-balance method. The rate used is twice the straight-line rate.
3) Thao uses the units-of-activity method and estimates that the useful life of the machine is 113,270 units. Actual usage is as follows: 2014, 42,100 units; 2015, 34,190 units; 2016, 22,590 units; 2017, 14,390 units.
2014 | 2015 | 2016 | 2017 | |
Straight line method | $ | $ | $ | $ |
Declining balance method | $ | $ | $ | $ |
Units of activity method | $ | $ | $ | $ |
Thanks!
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