On January 2, 2018 Smith Electronics purchased a machine to help automate operations. The Company that manufactured the machine had a standard price for this item at $25,000, but Smith was able to negotiate a 20% discount from standard price. However, as a result of the lower price Smith paid $1,200 of freight costs, hired an installation team for $1,300 to install the new machine. In addition, Smith had to rent a crane for $800 as part of the installation. The city required Smith to pay a one-time inspection fee of $700. Last, Smith incurred $1,000 training employees to use the new equipment. The equipment has a five year useful life with no salvage value.

1. For 2018 compute depreciation expense for straight-line and double declining balance.

2. Assume the equipment performs poorly and you decide to sell it after 9 months. You are able to sell the equipment for $14,000 cash. You used double declining balance depreciation method.

* Record the sale

Answer rating: 100% (QA)

1 To compute the depreciation expense for straightline and double declining balance methods for 2018 we first need to determine the cost of the equipment after the negotiated discount and including an... View the full answer