computing the acquisition cost and recording depreciation under three alternative me 558564

Computing the Acquisition Cost and Recording Depreciation under Three Alternative Methods 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.

2. Give the entry to record depreciation expense at the end of year 1, assuming the following:

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

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