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You are a staff accountant in a CPA firm. Your manager has asked you to provide a report containing accounting information on the following 3 clients:
Global Inc. purchased a machine and incurred the following expenditures:
|
Purchase price |
$20,000 |
||
|
Freight costs |
$ |
1,000 |
|
|
Sales tax |
$ |
2,000 |
|
|
Insurance on shipment |
$200 |
||
|
Insurance for the first year on the machine |
$500 |
||
|
Installation of the machine |
- Calculate the cost to be capitalized.
- Make an entry that will show which expenses will be capitalized when recording the machine on the books.
- Show the entry that will be recorded to expense the cost that will not be capitalized.
Brands Resources traded an old machine for a new machine. The book value of the old machine was $150,000 (original cost $320,000, less accumulated depreciation of $170,000). The fair value was $180,000. Brands Resources paid $20,000 to complete the exchange.
- Prepare the journal entry to record the exchange.
Reliable Company purchased a machine on January 1,
2008
at a net cost of $85,000. At the end of the 4-year life, it expects the machine will have a salvage value of $5,000. It also estimates that the machine will run for 10,000 hours during its 4-year life. The company has a fiscal year that ends on December 31.
|
Year |
Machine hours |
|
2009 |
3,000 |
|
2010 |
|
|
2011 |
4,000 |
- Calculate the depreciation under the straight line method.
- Calculate the depreciation under the double declining method.
- Calculate the depreciation under the units of production method.
