PA9-1 (Algo) Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods [LO 9-2, LO 9-3]

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At the beginning of the year, Cruz & Turner Corporation bought three used machines. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Details for Machine A are provided below.

Cost of the asset	$10,700
Installation costs	970
Renovation costs prior to use	1,110
Repairs after production began	850

PA9-1 (Algo) Part 1

Required:

1. Compute the amount to be capitalized for Machine A.

2. Compute year 2 straight-line depreciation expense for Machine A, assuming an estimated life of 4 years and $1,000 residual value.

3. Prepare the journal entry to record year 2 straight-line depreciation expense for Machine A, assuming an estimated life of 4 years and $1,000 residual value. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

No	Transaction	General Journal	Debit	Credit
A	1	Cash

4. Compute year 2 units-of-production depreciation expense for Machine B, assuming a capitalized cost of $49,140, an estimated life of 30,000 hours, $4,500 residual value, and actual year 2 use of 8,000 hours. (Do not round intermediate calculations.)

Year 2 units-of-production depreciation expense