On January 1, 2020, Arlo Company purchased two machines for use in its production process: Machine...

 

Transcribed Image Text:

On January 1, 2020, Arlo Company purchased two machines for use in its production process: Machine A: The cash price of this machine was $55.000. Related expenditures included: sales tax $2,750, shipping costs $100, insurance during shipping $75, installation and testing costs S75, and $90 of oil and lubricants to be used with the machinery during its first year of operation. Arlo estimates that the useful life of the machine is 4 years with a $5,000 salvage value remaining at the end of that time period. Machine B: The recorded cost of this machine was $100,000. Arlo estimates that the useful life of the machine is 4 years with a $10,000 salvage value remaining at the end of that time period. Instructions a. Prepare the following for Machine A. 1. The journal entry to record its purchase on January 1, 2020. 2. The joumal entry to record annual depreciation at December 31, 2020, assuming the straight-line method of depreciation is used. b. Calculate the amount of depreciation expense that Arlo should record for Machine B each year of its useful life under the following assumption. 1. Arlo uses the straight-line method of depreciation. 2. Arlo uses the declining-balance method. The rate used is twice the straight-line rate. 3. Arlo uses the umits-of-activity method and estimates the useful life of the machine is 25,000 units. Actual usage is as follows: 2017, 5,500 units: 2018, 7,000 units: 2019, 8,000 units; 2020, 4,500 units. On January 1, 2020, Arlo Company purchased two machines for use in its production process: Machine A: The cash price of this machine was $55.000. Related expenditures included: sales tax $2,750, shipping costs $100, insurance during shipping $75, installation and testing costs S75, and $90 of oil and lubricants to be used with the machinery during its first year of operation. Arlo estimates that the useful life of the machine is 4 years with a $5,000 salvage value remaining at the end of that time period. Machine B: The recorded cost of this machine was $100,000. Arlo estimates that the useful life of the machine is 4 years with a $10,000 salvage value remaining at the end of that time period. Instructions a. Prepare the following for Machine A. 1. The journal entry to record its purchase on January 1, 2020. 2. The joumal entry to record annual depreciation at December 31, 2020, assuming the straight-line method of depreciation is used. b. Calculate the amount of depreciation expense that Arlo should record for Machine B each year of its useful life under the following assumption. 1. Arlo uses the straight-line method of depreciation. 2. Arlo uses the declining-balance method. The rate used is twice the straight-line rate. 3. Arlo uses the umits-of-activity method and estimates the useful life of the machine is 25,000 units. Actual usage is as follows: 2017, 5,500 units: 2018, 7,000 units: 2019, 8,000 units; 2020, 4,500 units.

Answer rating: 100% (QA)

Please hit LIKE button if this helped For any further explanation please put your query in comment w... View the full answer