Reference no: EM132656723
Problem 1 - Depreciation methods
A machine costing $211,000 with a four-year life and an estimated $19,000 salvage value is installed in Luther Company's factory on January 1. The factory manager estimates the machine will produce 480,000 units of product during its life. It actually produces the following units: 123,100 in Year 1, 123,200 in Year 2, 119,600 in Year 3, 124,100 in Year 4. The total number of units produced by the end of Year 4 exceeds the original estimate-this difference was not predicted. Note: The machine cannot be depreciated below its estimated salvage value.
Required -
Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method.
Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Straight-line depreciation.
Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Units of production.
Compute depreciation for each year (and total depreciation of all years combined) for the machine under the Double-declining-balance.
Problem 2 - Disposal of plant assets
Onslow Co. purchased a used machine for $144,000 cash on January 2. On January 3, Onslow paid $8,000 to wire electricity to the machine and an additional $1,600 to secure it in place. The machine will be used for six years and have a $17,280 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations, it is disposed of.
Required -
A. Prepare journal entries to record the machine's purchase and the costs to ready it for use. Cash is paid for all costs incurred.
Record the purchase of a used machine for $144,000 cash.
Record the costs of $8,000 incurred on the used machine
Record the cost of $1,600 for an operating platform.
B. Prepare journal entries to record depreciation of the machine at December 31.
Record the first year year-end adjusting entry for the depreciation expense of the used machine.
Record the year of disposal year-end adjusting entry for the depreciation expense of the used machine.
C. Prepare journal entries to record the machine's disposal under each separate situation: (a) it is sold for $21,500 cash and (b) it is sold for $86,000 cash.
Record the sale of the used machine for $21,500 cash.
Record the sale of the used machine for $86,000 cash.