Reference no: EM132593129
Question - On January 1, 2015, Zidan Company purchased the following Two Machines for use in its production process.
Machine A: The cash price of this machine was Tk.55,000. Related expenditures included: sales tax Tk.2,750, shipping costs Tk.100, insurance during shipping Tk.75, installation and testing costs Tk.75, and Tk.90 of oil and lubricants to be used with the machinery during its first year of operation. Zidan estimates that the useful life of the machine is 4 years with a Tk.5,000 salvage value remaining at the end of that time period.
Machine B: The recorded cost of this machine was Tk.100,000. Zidan estimates that the useful life of the machine is 4 years with a Tk.10,000 salvage value remaining at the end of that time period.
Instructions - Prepare the following for Machine A.
1. Determine the cost of Machine A.
2. The journal entry to record its purchase on January 1, 2015.
3. The journal entry to record annual depreciation at December 31, 2015, assuming the straight-line method of depreciation is used.
Calculate the amount of depreciation expense that Zidan should record for Machine B each year of its useful life under the following assumption.
1. Zidan uses the straight-line method of depreciation.
2. Zidan uses the declining-balance method. The rate used is twice the straight-line rate.
3. Zidan uses the units-of-activity method and estimates the useful life of the machine is 25,000 units. Actual usage is as follows: 2015, 5,500 units; 2016, 7,000 units; 2017, 8,000 units; 2018, 4,500 units.
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