On January 1, 2020, Pele Industries purchased the following two machines for use in

the production process.

Machine A: The cash price of this machine is R$35,000. Related expenses include: sales tax

R$2,200, shipping fee R$150, insurance during shipping R$80,

installation and testing costs R$70, and oil and lubricants R$100 to be used with the machine during

first year of operation. Pele estimates that the useful life of the machine is 5 years

with a residual value of R$5,000 remaining at the end of that time period. Assume

The depreciation method used is the straight-line method.

Machine B: The carrying cost of this machine is R$80,000. Pele estimates that the useful life of

the machine is 4 years old with a salvage value of R$5,000 remaining at the end of term

the.

instructions

a. Prepare the following journal entry for Machine A.

1. Journal entry to record the purchase on January 1, 2020.

2. Journal entry to record annual depreciation as of December 31, 2020.

b. Calculate the amount of depreciation expense that Pele must record for Machine B each year over the life of

benefits with the following assumptions.

1. Pele uses the straight-line depreciation method.

2. Pele uses the declining balance method. The rate used is twice the straight line rate.

3. Pele used the unit of activity method and estimated that the useful life of the machine was

125,000 units. Actual usage is as follows: 2020, 42,000 units; 2021, 37,000 units; 2022,

28,000 units; and 2023, 18,000 units.

C. Which method is used to calculate depreciation on Machine B that reports the highest amount of depreciation expense

in year 1 (2020)? Highest number in year 4 (2023)? The highest total amount during

4 year period?