Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2022, Sheffield Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine

On January 1, 2022, Sheffield Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine was $37,500. Related expenditures also paid in cash included: sales tax $2,000, shipping costs $150, insurance during shipping $110, installation and testing costs $120, and $100 of oil and lubricants to be used with the machinery during its first year of operations. Sheffield estimates that the useful life of the machine is 5 years with a $4,500 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 $180,000. Sheffield estimates that the useful life of the machine is 4 years with a $10,060 salvage value remaining at the end of that time period.

a. Prepare the following for Machine A.

1) The journal entry to record its purchase on January 1, 2022.

2) The journal entry to record annual depreciation at December 31, 2022.

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

(1)Sheffield uses the straight-line method of depreciation.

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

(3)Sheffield uses the units-of-activity method and estimates that the useful life of the machine is 146,500 units. Actual usage is as follows: 2022, 51,000 units; 2023, 40,500 units; 2024, 30,000 units; and 2025, 25,000 units.

c. Which method used to calculate depreciation on Machine B reports the highest amount of depreciation expense in year 1 (2022)?

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

Step: 3

blur-text-image

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

Effective Writing A For Accountants

Authors: Claire B. May, Gordon S. May

11th Edition

0134667387, 9780134667386

More Books

Students also viewed these Accounting questions

Question

Did the researcher seek out those who are silent and marginalized?

Answered: 1 week ago

Question

1. To generate a discussion on the concept of roles

Answered: 1 week ago