Question
On June 1, 2019, Concord Company purchased the following machine for use in its production process. The cash price of this machine was $37,500. Related
On June 1, 2019, Concord Company purchased the following machine for use in its production process.
| The cash price of this machine was $37,500. Related expenditures included: sales tax $3,600, shipping costs $100, insurance during shipping $50, installation and testing costs $120, and $150 of oil and lubricants to be used with the machinery during its first year of operations. Concord estimates that the useful life of the machine is 4 years with a $5,950 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used. |
A. Prepare the following:
| 1. | The journal entry to record its purchase on June 1, 2019. | |
| 2. | The journal entry to record annual depreciation at December 31, 2019. | |
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| B. Calculate the amount of depreciation expense that Concord should record for each year of its useful life under the following assumptions. |
| (1) | Concord uses the straight-line method of depreciation. | |
| (2) | Concord uses the declining-balance method. The rate used is twice the straight-line rate. | |
| (3) | Concord uses the units-of-activity method and estimates that the useful life of the machine is 117,100 units. Actual usage is as follows: 2019, 45,000 units; 2020, 33,500 units; 2021, 22,000 units; 2022, 16,600 units. |
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