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On January 1, 2012, Pele Company purchased the following twomachines for use in its production process.
Machine A The cash price of this machine was $38,000. Relatedexpenditures included: sales tax $1,700, shipping costs $150,insurance during shipping $80, installation and testing costs $70,and $100 of oil and lubricants to be used with the machinery duringits first year of operations. Pele estimates that the useful lifeof the machine is 5 years with a $5,000 salvage value remaining atthe end of that time period. Assume that the straight-line methodof depreciation is used.
Machine B The recorded cost of this machine was $160,000. Peleestimates that the useful life of the machine is 4 years with a$10,000 salvage value remaining at the end of that timeperiod.




Prepare the following for Machine A.
The journal entry to record its purchase on January 1, 2012.
The journal entry to record annual depreciation at December 31,2012.
Date Account/Description Debit Credit

Jan. 1

Dec. 31

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Sixta Kovacek
Sixta KovacekLv2
29 Sep 2019

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P10-3A

On January 1, 2008, Pele Company purchased the following twomachines for use in its production process.
Machine A The cash price of this machine was $38,000. Relatedexpenditures included: sales tax $1,700, shipping costs $150,insurance during shipping $80, installation and testing costs $70,and $100 of oil and lubricants to be used with the machinery duringits first year of operations. Pele estimates that the useful lifeof the machine is 5 years with a $5,000 salvage value remaining atthe end of that time period. Assume that the straight-line methodof depreciation is used.
Machine B The recorded cost of this machine was $160,000. Peleestimates that the useful life of the machine is 4 years with a$10,000 salvage value remaining at the end of that timeperiod.






Correct.

Prepare the following for Machine A.
1. The journal entry to record its purchase on January 1,2008.
2. The journal entry to record annual depreciation at December 31,2008.
Account / Description Debit Credit
1. Machinery
$ 40000

Cash
$ 40000

2. Depreciation expense
$ 7000

Accumulated depreciation
$ 7000





This part is not coming out


Incorrect.





Calculate the amount of depreciation expense that should record formachine B each year of its useful life under the followingassumptions. (Round depreciation cost per unit to 2 decimal places.Round final answers to 0 decimal places, e.g. 125.)

Pele uses the straight-line method of depreciation.
Pele uses the declining-balance method. The rate used is twice thestraight-line rate.
Pele uses the units-of-activity method and estimates that theuseful life of the machine is 125,000 units. Actual usage is asfollows: 2008, 45,000 units; 2009, 35,000 units; 2010, 25,000units; 2011, 20,000 units.


Year 1
Year 2
Year 3
Year 4

1.
Straight-line
$
$
$
$

2.
Declining-balance
$
$
$
$

3.
Units-of-activity
$
$
$
$




Year 4 1. 4000

2. 24000


3 .2400













Incorrect.





Which method used to calculate depreciation on machine B reportsthe highest amount of depreciation expense in year 1 (2008)?declining-balance method This is correct

The highest amount in year 4 (2011)? units-of-activity methodallmethods are the samedeclining-balance methodstraight-linemethod

The highest total amount over the 4-year period? declining-balancemethodunits-of-activity methodall methods are the samestraight-linemethod



















On January 1, 2012, JacksonCompany purchased factory equipment priced at$55,000. Sales tax was an additional 6%,and the company spent $4,000 to install the machinery. After thecompany began using the machine (placed in service), there wereadditional costs of $800 for insurance and $1,200 formaintenance.

The estimated useful life ofthe machine was five years and residual value was expected to be$6,300. The equipment is expected to produce 200,000 units duringits useful life.

Required:

1. At what amount should Jackson record the purchase of themachine?

$____________

What is the appropriate treatment for the maintenance andinsurance?

(i.e., Are they capital orrevenue expenditures? Check one. Do they belong on the incomestatement or the balance sheet? Check one.)

Capital expenditure ____ BalanceSheet ____

Revenue expenditure____ Income Statement ____

2. Prepare the journal entry to record depreciation for 2012, assumingthe company uses the straight-line method..

_________________________________________________________

_________________________________________________________

Computation:

3. Compute depreciation for 2012, assuming the company uses theunits of production method. The equipmentproduced 30,000 units in 2012.

$_____________

4. Compute depreciation for 2012 AND 2013, assuming the companyuses the double-declining balance method..

2012: $_____________

2013: $_____________

5. Assume that the company chose straight-line (as you did in #2). On March 31, 2014,Jackson sold the equipment for $35,000 incash. Notice that the sale did notoccur on December 31!

a. What was the accumulated depreciation of this equipment on thedate

of sale?

$_____________

b. What was the book value on the date of sale?

$_____________

c. What was the gain/loss on sale?

Gain Loss $______________

(Circleone)

d.Prepare the journal entry to record the sale?

On January 1, 2012, JacksonCompany purchased factory equipment priced at $55,000. Sales tax was an additional 6%, and the company spent $4,000 toinstall the machinery. After the company began using the machine(placed in service), there were additional costs of $800 forinsurance and $1,200 for maintenance.

The estimated useful life ofthe machine was five years and residual value was expected to be$6,300. The equipment is expected to produce 200,000 units duringits useful life.

Required:

1. At whatamount should Jackson record the purchase of themachine?

$____________

What is the appropriate treatment for the maintenance andinsurance?

(i.e., Are they capital orrevenue expenditures? Check one. Do they belong on the incomestatement or the balance sheet? Check one.)

Capital expenditure ____ Balance Sheet ____

Revenue expenditure____ Income Statement ____

2. Prepare thejournal entry to record depreciation for 2012, assuming the companyuses the straight-line method. .

_________________________________________________________

_________________________________________________________

Computation:

3. Computedepreciation for 2012, assuming the company uses the units of production method. The equipment produced30,000 units in 2012.

$_____________


4. Compute depreciation for 2012 AND 2013, assuming the company usesthe double-declining balancemethod. .

2012: $_____________

2013: $_____________

5. Assume that thecompany chose straight-line (as you did in #2).On March 31, 2014, Jackson sold the equipment for$35,000 in cash. Notice that the sale did not occur on December31!

a. What was the accumulated depreciation of this equipment on thedate

of sale?

$_____________

b. What was the book value on the date of sale?

$_____________

c. What was the gain/loss on sale?

Gain Loss $______________

(Circle one)

Prepare the journal entry torecord the sale:

_______________________________________________________________________

_______________________________________________________________________

_______________________________________________________________________

_______________________________________________________________________

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