Compute the cost of each machine

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Problem: The Effects of Differing Depreciation Methods

Total Workout, Inc. purchased three machines from Ace Used Equipment at the beginning of the year. All three were used machines that had to be overhauled and installed before they were put into use. The costs of the machines and their renovation and installation are shown in Table 1 below:

Problem 2, Table 1: Equipment Costs

Account

Machine A

Machine B

Machine C

Amount paid for asset

$21,000

$30,750

$8,000

Installation cost

$500

$1,000

$200

Renovation costs prior to use

$2,000

$1,000

$1,500

By the end of the first year, each machine had been operating 4,800 hours. Depreciation estimates are shown in Table 2 below:

Problem 2, Table 2: Equipment Depreciation

Machine

Life

Residual Value

Depreciation Method

A

5 years

$1,000

Straight-line

B

60,000 hours

$2,000

Units-of-production

C

4 years

$1,500

Double-declining balance

Using the data provided above, complete the following:

1. Compute the cost of each machine.

2. Give the entry to record depreciation expense at the end of the first year, using all three depreciation methods listed in Table 2.

Reference no: EM131693951

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