value: 25.00 points PB9-1 Computing Acquisition Cost and Recording Depreciation

Question

value: 25.00 points PB9-1 Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods LO 9-2, LO 9-3] At the beginning of the year, Oakmont Company bought three used machines from American Manufacturing, Inc. The machines immediately were overhauled, were installed, and started operating Because the machines were different, each was recorded separately in the accounts. Machine A Machine B Machine C Amount paid for asset Installation costs Renovation costs prior to use Repairs after production began $21,600 12,100 $11,800 600 1,100 980 1,300 1,100 620 700 400 2,900 By the end of the first year, each machine had been operating 4,000 hours. Required: 1. Compute the cost of each machine. MachineA Machine B Machine C

Explanation / Answer

Note : Repairs after use not to add to asset a/c

1 Machine Particulars A B C Cost        21,600        12,100        11,800 Installation cost           1,300              700              600 Renovation csot before use           1,100              400           1,100 Cost of each machine        24,000        13,200        13,500

Note : Repairs after use not to add to asset a/c

2 Journal entry Transaction General Ledger Debit Credit 1 Depreciation expense A/c Dr         9,400 To Accumulated Depreciation Machine A A/c         4,420 To Accumulated Depreciation Machine B A/c         2,280 To Accumulated Depreciation Machine C A/c         2,700 Machine A cost 24000 Less: Residual value 1900 Value 22100 life 5 years Depreciation 4420 Machine B cost 13200 Less: Residual value 1800 Value 11400 Hours used 4000 Total Hours 20000 Depreciation 2280 (11400*4000/20000) Machine C cost 13500 Life 10 years Double declineing depreciation 2700 (13500/10*2)

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