P10-3A urchased the following two machines for P10-3A On January 1, 2017, Evers

Question

P10-3A

urchased the following two machines for P10-3A On January 1, 2017, Evers Comp use in its production process Machine A: The cash price of this machine was $48,000. Related inluded: sales tax $1,700, shipping costs $150, insurance durina sk oil and lubri- estimates that the useful life of the machine is 5 years with a Machine B: The recorded cost of this machine was $180,000. Evers estimates that ping $80, installation and testing costs $70, and$100fling ship cants to be used with the machinery during its first year of Evers $5,000 salvage value remaining at the end of that time period. Ase that the straight-line method of depreciation is used. the useful life of the machine is 4 years with a $10,000 salvage value remaining at the end of that time period.

Explanation / Answer

Requirement A Amount in $ Date General Journal Debit Credit Machine A January 1, 2017 Machinery 50000 =48000+1700+150+80+70 Cash 50000 To record the purchase of Machinery December 31, 2017 Depreication on Machinery 9000 =(50000-5000)/5 Accumulated depreciation on Machinery 9000 Requirement B Machine B Calculation of amount of Depreciation expense Straight-line method =(180000-10000)/4 Years 42500 Double Declining Balance method Straight-line depreication rate (1/4%) 25% Accelared depreciation (25*200%) 50% Year Book value of the asset at the start of the year Rateof declining Blance Depreciation expense Accumuluted depreciation Book Value of asset at the end of the year 1 180000 50% 90000 90000 90000 2 90000 50% 45000 135000 45000 3 45000 50% 22500 157500 22500 4 22500 50% 12500 170000 10000 Units of activity method units used Depreciation expense Year 1 45000 61200 2 35000 47600 3 25000 34000 4 20000 27200 Total 125000 170000 Depreciable base =180000-10000 170000 Depreication per unit =170000/125000 1.36 Requirement C The highest amount of depreciation for first year Double Declining Balance method The highest amount of depreciation for fourth year Straight-line method The highest total amount over the four year period Double Declining Balance method

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