Question

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At the beginning of the year, Plummer's Sports Center bought three used fitness machines from Brunswick Corporation. The machines immediately were overhauled, installed, and started operating. The machines were different; therefore, each had to be recorded separately in the accounts.

	Machine A		Machine B		Machine C
Invoice price paid for asset	$	32,300	$	32,300	$	23,400
Installation costs		2,300		2,400		1,100
Renovation costs prior to use		4,000		1,000		1,900

By the end of the first year, each machine had been operating 6,500 hours.

2. Prepare the entry to record depreciation expense at the end of Year 1, assuming the following. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

	ESTIMATES
Machine		Life	Residual Value		Depreciation Method
A		9 years	$1,700		Straight-line
B		64,000 hours	3,700		Units-of-production
C		8 years	1,500		Double-declining-balance

Answer 1

Machine A

Total cost = invoice price+ installation+ renovation cost

= 32300+2300+4000

= 38600

Depreciation = (total cost-salvage value)/useful life

= (38,600-1700)/9

= 4100

Journal entry is

Depreciation expense 4100

Accumulated Depreciation         4100

Machine B

Total cost = invoice price+ installation+ renovation cost

= 32300+2400+1000 = 35700

Depreciation = (total cost-salvage value)*Hours of use /useful life

= (35700-3700)*6500/64000

= 3250

Journal entry is

Depreciation expense 3250

Accumulated Depreciation         3250

Machine C

Total cost = invoice price+ installation+ renovation cost

= 23400+1100+1900 = 26400

Depreciation = (total cost-salvage value)*2/useful life

= (26400-1500)*2/8

= 6225

Journal entry is

Depreciation expense 6225

Accumulated Depreciation         6225