Accounting Principles 9th edition, ISBN 978-0470-31754-9, Weygandt
Problem 10-3A but you need to do ONLY requirement B of the problem.
On Jan1, 2010 Pele co. purchased two machines for production process.
Machine A: Cash price was $38,000. Related expenditures include: sales tax $1700, shipping $150, shipping insurance $80, installation and testing cost $70, $100 for oil and lubricants to be used the first fiscal year. Pele estimates that the useful life of machine is 5 yrs. with a $5000 salvage caveat the end of that period. Assume to use the straight line method of depreciation is used.
Machine B: $160, 00 recorded cost, Estimated useful life is 4 yrs. $10,000 salvage value at the end of that time.
Calculate the amount of depreciation expense that Peke should record for Machine B each year of its useful life.
1. Use the straight line method of depreciation.
2. Use the declining balance method. the rate is used twice in the straight line method.
3. Use the unit of activity method and estimates that useful life of the machine is $125,000 units. Actual usage: 2010-45,000 units, 2011-35,000 units, 2012-25,000 units, 2013-20,000 units.
The solution explains depreciation calculating using straight line method of depreciation, declining balance method and the unit of activity method.