Question

At the beginning of the year, Grillo Industries bought three used machines from Freeman Incorporated. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts Cost of the asset Installation costs Renovation costs prior to use Repairs after production began Machine A $9,300 950 750 Machine B $38,500 2,400 2,000 Machine C $22,300 1.500 2,500 1.000 800 900 By the end of the first year, each machine had been operating 8.000 hours. Required: 1. Compute the cost of each machine 2. Prepare the journal entry to record depreciation expense at the end of year 1. assuming the following: Machine Estimates Life Residual Value 5 years $1,300 20,000 hours 900 10 years 1,700 Depreciation Method Straight-line Units-of-production Double-declining-balance

Answer 1

Computation of Cost of Each machine
Particulars	Machine A	Machine B	Machine C
Cost of asset	$ 9,300.00	$ 38,500.00	$ 22,300.00
Installation cost	$ 950.00	$ 2,400.00	$ 1,500.00
Renovation cost prior to use	$ 750.00	$ 2,000.00	$ 2,500.00
Total cost to be capitalized	$ 11,000.00	$ 42,900.00	$ 26,300.00
Journal Entries
Particulars		Debit	Credit
Depreciation Expense		$ 23,660.00
Accumulated Depreciation - Machine A ((11000-1300)/5)			$ 1,940.00
Accumulated Depreciation - Machine B ((42900-900)/20000*8000)			$ 16,800.00
Accumulated Depreciation - Machine C (2*((26300-1700)/10))			$ 4,920.00
(To record depreciation expense)