Question

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

Journal Entry
Machine A
Depreciation Expense	$4,100.00
Accumulated Depreciation		$4,100.00
Machine B
Depreciation Expense	$3,250.00
Accumulated Depreciation		$3,250.00
Machine C	$6,600.00
Depreciation Expense		$6,600.00
Accumulated Depreciation

Computation of Cost of Each Machine
	Machien A	Machine B	Machien C
Invoice Price Paid for Asset	32300	32300	23400
Installation Cost	2300	2400	1100
Renovation Cost prior to use	4000	1000	1900
Total Cost of Machine	38600	35700	26400

Deprection for Machine A

Depreciation as per SLM= (Cost of Machien - Residual Value)useful life

=(38600-1700)/9= $4100

Deprection for Machine B

Depreciation as per SLM=( (Cost of Machien - Residual Value)/Unit of Production) Actual Hour

=((35700-3700)/64000)X6500= $3250

Depreciation Machien C

Rate of Depreciation = 1/ Usefule Life X2

=1/8X2= 25%

=26400*25%= $6600