FREE Trial

At the beginning of the year, Oak mountain Company bought three used machines from Canadian Manufacturing, Inc.

Question:

At the beginning of the year, Oak mountain Company bought three used machines from Canadian Manufacturing, Inc. The machines immediately were overhauled, installed, and started operating. Because the machines were different from each other, each was recorded separately in the accounts. 

Machine A Machine B Machine C Amount paid for asset $19,600 $10,100 $9,800 Installation costs 300 500 200 Renovation costs prior to use 100 300 600 Repairs after production began 220 900 480

By the end of the first year, each machine had been operating 4,000 hours.


Required: 

1. Compute the cost of each machine. Explain the rationale for capitalizing or expensing the various costs. 

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

Transcribed Image Text:

Amount paid for asset Installation costs Renovation costs prior to use Repairs after production began Machine A $19,600 300 1.00 220 Machine B $10,100 500 300 900 Machine C $9,800 200 600 480

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 33% (3 reviews)

1 Cost of each machine Machine A B C Total Purchase price 19600 10100 9800 39500 Installation costs ...View the full answer


answer-question
Answered By
tutor-profile-image
Joseph Ogoma
I have been working as a tutor for the last five years. I always help students to learn and understand concepts that appears challenging to them. I am always available 24/7 and I am a flexible person with the ability to handle a wide range of subjects.
5.00+ 1+ Reviews 10+ Question Solved
Related Book For  answer-question
Fundamentals of Financial Accounting

Fundamentals of Financial Accounting

ISBN: 978-1259269868

5th Canadian edition

Authors: Fred Phillips, Robert Libby, Patricia Libby, Brandy Mackintosh

See More Books
Question Posted:
See More Questions

Related Video

Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.

Students also viewed these Business questions

Criminal Investigation 11th Edition - ISBN: 0078111528 - Free Book