Question
PA9-1 Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods [LO 9-2, LO 9-3] At the beginning of the year, Grillo Industries bought three
PA9-1 Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods [LO 9-2, LO 9-3]
At the beginning of the year, Grillo Industries bought three used machines from Freeman Incorporated. The machines immediately were overhauled, installed, and started operating. Because the machines were different, each was recorded separately in the accounts. |
Machine A | Machine B | Machine C | |||||||
Cost of the asset | $ | 10,600 | $ | 39,800 | $ | 23,600 | |||
Installation costs | 850 | 3,700 | 2,800 | ||||||
Renovation costs prior to use | 650 | 3,300 | 3,800 | ||||||
Repairs after production began | 500 | 700 | 2,300 | ||||||
By the end of the first year, each machine had been operating 8,000 hours. |
Required: | |
1. | Compute the cost of each machine. |
2. | Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following:(If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.) |
Estimates | ||||||
Machine | Life | Residual Value | Depreciation Method | |||
A | 5 years | $ | 2,600 | Straight-line | ||
B | 20,000 hours | 2,200 | Units-of-production | |||
C | 10 years | 1,400 | Double-declining-balance | |||
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