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On January 1, 2011, a company purchased a machine for$138,000. In addition, the company paid delivery costs of $1,200and $4,800 to have the machine installed. At the end of 5 years,the company expects the machine to have a residual value of$11,500. The company expects the machine will last 10,000 hours. Inthe first year, the company used the machine for 3,000 hours. (Usethese facts to answer questions 3 – 8)

Before depreciating the machine, what total amount will thecompany record as an asset for this machine?

Question 3 options:

$144,000

$138,000

$139,200

$142,800

On January 1, 2011, a company purchased a machine for$138,000. In addition, the company paid delivery costs of $1,200and $4,800 to have the machine installed. At the end of 5 years,the company expects the machine to have a residual value of$11,500. The company expects the machine will last 10,000 hours. Inthe first year, the company used the machine for 3,000 hours. (Usethese facts to answer questions 3 – 8)

Regardless of the depreciation method, what will be the amountof accumulated depreciation after the five years?

Question 4 options:

$128,500

$130,000

$132,500

$135,000

On January 1, 2011, a company purchased a machine for$138,000. In addition, the company paid delivery costs of $1,200and $4,800 to have the machine installed. At the end of 5 years,the company expects the machine to have a residual value of$11,500. The company expects the machine will last 10,000 hours. Inthe first year, the company used the machine for 3,000 hours. (Usethese facts to answer questions 3 – 8)

If the company used straight line method fordepreciation, how much depreciation expense would be recorded inthe first year?

Question 5 options:

$30,000

$28,000

$29,500

$26,500

On January 1, 2011, a company purchased a machine for$138,000. In addition, the company paid delivery costs of $1,200and $4,800 to have the machine installed. At the end of 5 years,the company expects the machine to have a residual value of$11,500. The company expects the machine will last 10,000 hours. Inthe first year, the company used the machine for 3,000 hours. (Usethese facts to answer questions 3 – 8)

If the company used units of production method for depreciation,how much depreciation expense would be recorded in the firstyear?

Question 6 options:

$40,500

$43,750

$39,750

$54,500

On January 1, 2011, a company purchased a machine for$138,000. In addition, the company paid delivery costs of $1,200and $4,800 to have the machine installed. At the end of 5 years,the company expects the machine to have a residual value of$11,500. The company expects the machine will last 10,000 hours. Inthe first year, the company used the machine for 3,000 hours. (Usethese facts to answer questions 3 – 8)

If the company used double declining balance method fordepreciation, how much depreciation expense would be recorded inthe first year?

Question 7 options:

$57,600

$60,400

$40,300

$55,430

On January 1, 2011, a company purchased a machine for$138,000. In addition, the company paid delivery costs of $1,200and $4,800 to have the machine installed. At the end of 5 years,the company expects the machine to have a residual value of$11,500. The company expects the machine will last 10,000 hours. Inthe first year, the company used the machine for 3,000 hours. (Usethese facts to answer questions 3 – 8)

If the company sells the machine at the end of 5 yearsand receives $11,000, the journal entry to record the sale willinclude which of the following?

Question 8 options:

Debit to Accumulated Depreciation for $138,000

Credit to Machine for $138,000

Debit to Loss on Sale for $500

Credit to Gain for $500

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Jamar Ferry
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28 Sep 2019

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Reliable Company purchased a machine on January 1, 2008 at a netcost of $85,000. At the end of the 4-year life, it expects themachine will have a salvage value of $5,000. It also estimates thatthe machine will run for 10,000 hours during its 4-year life. Thecompany has a fiscal year that ends on December 31.

Year
Machine hours

2008
2,000

2009
3,000

2010
1,000

2011
4,000


7. Depreciation computations: change inestimate. Aussie Imports purchased a specialized piece ofmachinery for $50,000 on January 1, 20X3. At the time ofacquisition, the machine was estimated to have a service life of 5years (25,000 operating hours) and a residual value of $5,000.During the 5 years of operations (20X3 - 20X7), the machine wasused for 5,100, 4,800, 3,200, 6,000, and 5,900 hours, respectively.<?xml:namespace prefix = o ns ="urn:schemas-microsoft-com:office:office" />

Instructions

a. Compute depreciation for 20X3 - 20X7 byusing the following methods: straight line, units of output, anddouble-declining-balance.

b. On January 1, 20X5, management shortenedthe remaining service life of the machine to 20 months. Assuminguse of the straight-line method, compute the company%u2019sdepreciation expense for 20X5.

c. Briefly describe what you would havedone differently in part (a) if Aussie Imports had paid $47,800 forthe machinery rather than $50,000. In addition, assume that thecompany incurred $800 of freight charges $1,400 for machine setupand testing, and $300 for insurance during the first year ofuse.

I need the following events entered into a general journal.

Thank you.

(1) Kevin and Gloria got together with thedocumentation and began to review the long-term asset activities.On January 15, 20x7, the company disposed of a stamping machine.The machine was originally purchased on January 15, 20x0 for$84,000. The machine was estimated to have a useful life of 10years with a zero salvage value. (Note: Gray & Greene use astraight-line method of depreciation for all long-term assetsunless otherwise noted.) No effort was made to sell or trade themachine because the machine was broken beyond repair. $100 was alsopaid to a salvage company to disassemble and remove the machinefrom the plant.

(2) The next activity occurred on February 1,20x7. A molding machine was purchased for $247,000. The machinecost an additional $10,000 to have it shipped to the plant. Once onlocation, the company had $5,000 in installation and operatingcosts before the machine was ready to begin full operation. Twoemployees went to a one-day training school to learn how to operatethe new machine at a cost of $1,400. The molding machine has an8-year useful life and a salvage value of $22,000. Thecompany paid cash for the shipping, installation, and trainingcharges plus $25,000 for the machine. The balance due on themachine was set up with a note payable.

(3) On March 1, 20x7, a cutting machine wastraded in for a similar new computerized cutting machine. The oldmachine, which originally cost $130,000, had been at the companysince January 1, 20x1 and had 1 year and 10 months of useful liferemaining. The salvage value of the old machine was estimated at$10,000, but the company received $36,000 as a trade in value. Thenew machine cost $280,000, which included delivery andinstallation. The new machine has an expected life of 10 years atwhich time it could probably be sold for $40,000. The company madea down payment of $20,000 and signed a five year note payable forthe balance due.

(4) April 1, 20x7 a pressing machine was soldfor $71,000. It originally cost $185,000 and had a book value onDecember 31, 20x6 of $72,500. The annual depreciation for thismachine was $18,000. The machine was expected to have a $5,000salvage value in about four years.

(5) To celebrate April 15, 20x7, the companyacquired a new utility van, which would be used to pick up anddeliver parts to customers and suppliers in the immediate vicinity.The van has a sticker price of $37,595, but the company was able tosecure the vehicle for $35,000. The van will probably have a usefullife of 5 years with a book value of $5,000 at the end of thattime. The company paid $7,000 and signed a 3 year note for thebalance due.

(6) On May 1, 20x7 an old pressing machine wastraded in for a new computerized processing machine. These machineswere used on different production lines and considered asdissimilar equipment. The old pressing machine cost $157,000 whenit was purchased on May 1, 20x3 and had a useful life of 8 yearswith a salvage value of $13,000. A $90,000 trade-in allowance wasgiven for the pressing machine. The new processing machine had alist price of $350,000, but only cost the company $260,000 afterthe trade-in. The new machine had a nine-year useful life with a$26,000 salvage value. The company paid $52,000 down and signed anote payable for the balance due.

(7) August 1, 20x7 the company had to completea major overhaul on an assembly machine. The machine had beenpurchased for $430,000 on August 1, 20x2. The machine was expectedto last for 12 years with a $70,000 salvage value. If the repairshad not been completed, the machine would not function efficientlyin the company and would have to be disposed for its parts, whichwould have brought the company about $30,000. The cost of therepairs was $33,000, but the overhaul was expected to add 2 yearsonto the remaining life of the machine. The repairs were paid forin cash.

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