At the beginning of the year, Grillo Industries bought three used machines. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Details for Machine A are provided below.
Cost of the asset ____________ $9,000
Installation cost ______________ 800
Renovation costs prior to use____ 600
Repairs after production began___ 500
1. Compute the amount to be capitalized for Machine A.
2. Compute year 2 straight-line depreciation expense for Machine A, assuming an estimated life of 4 years and $1,000 residual value.
3. Prepare the journal entry to record year 2 straight-line depreciation expense for Machine A, assuming an estimated life of 4 years and $1,000 residual value.
4. Compute year 2 units-of-production depreciation expense for Machine B, assuming a capitalized cost of $42,000, an estimated life of 30,000 hours, $4,500 residual value, and actual year 2 use of 8,000 hours.
5. Prepare the journal entry to record year 2 units-of-production depreciation expense for Machine B, assuming a capitalized cost of $42,000, an estimated life of 30,000 hours, $4,500 residual value, and actual year 2 use of 8,000 hours.
6. Compute years 1 and 2 double-declining-balance depreciation expense for Machine C, which has a cost of $25,400, an estimated life of 10 years, and $1,400 residual value.
7. Prepare the journal entry to record year 2 double-declining balance depreciation expense for Machine C, which has a cost of $25,400, an estimated life of 10 years, and $1,400 residual value.
