Question

Problem 10-03A a-c On January 1, 2020, Flint Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine was $46,000. Related expenditures included: sales tax $3,250, shipping costs $200, insurance during shipping $110, installation and testing costs $90, and $100 of oil and lubricants to be used with the machinery during its first year of operations. Flint estimates that the useful life of the machine is 5 years with a $4,200 salvage value remaining at the end of that time period. Assume that the straight-line method of depreciation is used. Machine B: The recorded cost of this machine was $180,000. Flint estimates that the useful life of the machine is 4 years with a $9,850 salvage value remaining at the end of that time period.

Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. 5,125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) 1. The journal entry to record its purchase on January 1, 2020. 2. The journal entry to record annual depreciation at December 31, 2020. No. Account Titles and Explanation Debit Credit 1. 2. SHOW LIST OF ACCOUNTS LINK TO TEXT

Calculate the amount of depreciation expense that Flint should record for Machine B each year of its useful life under the following assumptions. (Round depreciation cost per unit to 2 decimal places, e.g. 12.25. Round final answers to 0 decimal places, e.g. 2,125.) (1) Flint uses the straight-line method of depreciation. (2) Flint uses the declining-balance method. The rate used is twice the straight-line rate. (3) Flint uses the units-of-activity method and estimates that the useful life of the machine is 136,120 units. Actual usage is as follows: 2020, 49,000 units; 2021, 38,000 units; 2022, 27,000 units; 2023, 22,120 units. Depreciation Expense 2020 2021 2022 2023 Straight-line method $ $ $ $ Declining-balance method $ $ $ $ Units-of-activity method $ $ $ $ SHOW LIST OF ACCOUNTS LINK TO TEXT

Which method used to calculate depreciation on Machine B reports the highest amount of depreciation expense in year 1 (2020)? Declining-balance methodStraight-line methodUnits-of-activity methodAll of the above The highest amount in year 4 (2023)? Declining-balance methodStraight-line methodUnits-of-activity methodAll of the above The highest total amount over the 4-year period? Declining-balance methodStraight-line methodUnits-of-activity methodAll of the above Click if you would like to Show Work for this question: Open Show Work

Answer 1

	Purchase Price	$46,000
	Sales tax	$3,250
	Shipping costs	$200
	Insurance during shipping	$110
	Intallation and testing costs	$90
	Total Cost of machine	$49,450
Date	Account and explanation	Debit	Credit
1	Equipment	$49,450
	Cash		$49,450
	Depreciation expenses[($49,450-$4,200)/5]	$9,050
	Accumulated Depreciation-Equipment		$9,050
Calculation of Depreciation expenses for Machine B under different methods
Straight Line
Date	Cost of asset	Depreciable cost	Useful life	Depreciation expenses	Accumulated Depreciation	Book value
At Acquisition						$1,80,000
2020	$1,80,000	$1,70,150	4 Years	$42,538	$42,538	$1,37,463
2021	$1,80,000	$1,70,150	4 Years	$42,538	$85,075	$94,925
2022	$1,80,000	$1,70,150	4 Years	$42,538	$1,27,613	$52,388
2023	$1,80,000	$1,70,150	4 Years	$42,538	$1,70,150	$9,850
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
At Acquisition						$1,80,000
2020	$1,80,000	$1,80,000	50.00%	$90,000	$90,000	$90,000
2021	$1,80,000	$90,000	50.00%	$45,000	$1,35,000	$45,000
2022	$1,80,000	$45,000	50.00%	$22,500	$1,57,500	$22,500
2023	$1,80,000	$22,500	50.00%	$11,250	$1,68,750	$11,250
Units of activity
Date	Cost of asset	Depreciation per unit	No. of units	Depreciation expenses	Accumulated Depreciation	Book value
At Acquisition						$1,80,000
2020	$1,80,000	$1.25	49000	$61,250	$61,250	$1,18,750
2021	$1,80,000	$1.25	38000	$47,500	$1,08,750	$71,250
2022	$1,80,000	$1.25	27000	$33,750	$1,42,500	$37,500
2023	$1,80,000	$1.25	22120	$27,650	$1,70,150	$9,850
Highest depreciation in Year 2020 is from Double Declining balance method which is $90,000
Highest depreciation in Year 2023 is from Straight line method which is $42,538
The highest total amount is for Units of activity and Straight line method