At the beginning of the year, McCoy Company bought three used machines from Colt
ID: 2355515 • Letter: A
Question
At the beginning of the year, McCoy Company bought three used machines from Colt, Inc. The machines immediately were overhauled, installed, and started operating. Because the machines were different, each was recorded separately in the accounts.
Give the journal entry to record depreciation expense at the end of year 1, assuming the following: (TIP: Remember that the formula for double-declining-balance uses cost minus accumulated depreciation (not residual value).) (Do not round intermediate calculations. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)
Explanation / Answer
Cost of Machne is AMt Paid f0r Asset + Inst Cost + Removation costs. Machine A Machine B Machine C Amount paid for asset $ 6,750 $ 22,900 $ 6,900 Installation costs 330 660 190 Renovation costs prior to use 1,550 450 1,090 SO Mach A = 6750+330+1550 = $8,630 Mac B = 22900+660+450 = $24,010 Mac C = 6900+190+1090 = $8,180 Dep: A 5 years $ 500 Straight-line B 39,200 hours 850 Units-of-production C 5 years 2,300 Double-declining-balance Dep for Mac A SLN Method = (COst-Salvage)/Life = (8630-500)/5 = $1,626 Dep for Mac B UoP method = (Cost -Salvage)/N0 of Units = (24010-850)/39200 = $0.59 pu. So for 8050 Hrs, Dep of Mac B = 8050*$0.59 = $4,756 Dep for C DDB method = (2*100%/Life) = 2*100%/5 = 40% So Ddep for Y1 = Cost*40% = 8180*40% = $3,272 SO Journal entry will be mmddyy Dep Exp Dr $9,654 Accum Dep Mach A Cr 1626 Accum Dep Mach B Cr 4756 Accum Dep Mach C Cr 3272
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