accounting quiz 3

Financial Accounting Principles                                 Name: ___________________________

Quiz 3 Worth 30 Points

1. A machine was purchased for $37,000 and depreciated for five years on a straight-line basis under the assumption it would have a ten-year life and a $1,000 salvage value. At the beginning of the machine's sixth year it was recognized the machine had three years of remaining life instead of five and that at the end of the remaining three years its salvage value would be $1,600. What amount of depreciation should be recorded in each of the machine's remaining three years?   Please show all your calculations.  (10 Points)

2. On July 1 of the current year, a company purchased and placed in service a machine with a cost of $240,000. The company estimated the machine's useful life to be four years or 60,000 units of output with an estimated salvage value of $60,000. During the current year, 15,000 units were produced. (15 Points)

Prepare the necessary December 31 adjusting journal entry to record depreciation for the current year assuming the company uses:

a. The straight-line method of depreciation
b. The units-of-production method of depreciation
c. The double-declining balance method of depreciation 

3. A company purchased a special purpose machine on August 1 of the past year, and it was installed and ready to run on January 1 of this year. The following costs were incurred in the purchase and installation of the machine. (5 Points)