CF unit4 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.
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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
|
|
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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
|
|||
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Machine
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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
|
|
|
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File name: CF Unit4 P8-3 Plummers Sports Center.xls File type: .doc PRICE: $8
