Unit 4 Assignment 2 P8-3

profilelakeisha.smithwick
cf_unit4_p8-3.xlsx
Home>Business & Finance homework help>Accounting homework help>Unit 4 Assignment 2 P8-3

P8-3

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

P8-3 Check Figures

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

Sheet2

List1
No journal entry required
Accounts payable
Accounts receivable
Accumulated depreciation, Machine A
Accumulated depreciation, Machine B
Accumulated depreciation, Machine C
Additional paid-in capital
Allowance for uncollectible accounts
Amortization expense
Building
Cash
Common stock
Depreciation expense
Equipment
Gain on sale
Goodwill
Interest expense
Inventories
Land
Loss on sale
Note payable
Note receivable
Patent
Repair and maintenance expense
Truck