CF unit4 P8-3 / At the beginning of the year, Plummer’s Sports Center bought three used fitness machines from Advantage, Inc.

CF unit4 P8-3

P8-3 Computing the Acquisition Cost and Recording Depreciation under Three Alternative Methods LO8-2, 8-3

P8-3 At the beginning of the year, Plummer’s Sports Center bought three used fitness machines from Advantage, Inc. 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

  Amount paid for asset                       $11,000          $30,000            $8,000

  Installation costs                             500                 1,000                   500

  Renovation costs prior to use         2,500                 1,000                1,500

By the end of the first year, each machine had been operating 4,800 hours.

Required:

1. Compute the cost of each machine.

Total Cost

Machine A 

Machine B 

Machine C

Required:

2. Prepare one 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                     5 years             $1,000                                     Straight-line

B                      60,000 hours  2,000                           Units-of-production

C                      4 years             1,500                           Double-declining-balance

Transaction      General Journal                       Debit                Credit

1                      Depreciation expense  10,000