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On January 1, Wilcox Company acquires, for cash, four machines that have the following characteristics: Machine Cost Estimated Residual Service Value Life A $26,000 $2,000
On January 1, Wilcox Company acquires, for cash, four machines that have the following characteristics:
| Machine | Cost | Estimated | |
|---|---|---|---|
| Residual | Service | ||
| Value | Life | ||
| A | $26,000 | $2,000 | 6 years |
| B | 19,000 | 1,000 | 9 years |
| C | 30,000 | 5,000 | 5 years |
| D | 28,000 | 7 years | |
Required:
| 1. | Prepare journal entries to record the acquisition and the first years depreciation expense, assuming that the composite method is used on a straight-line basis. |
| 2. | If the company sells Machine B after 4 years for $10,000, prepare the journal entry. |
| 3. | Next Level What arguments may be used to support the composite depreciation method? |
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The Audit Committee Handbook
Authors: Louis Braiotta Jr.
3rd Edition
0471345768, 978-0471345763
