On January 1, 2005, Solomon Company purchased the following two machines for use in its production process.
Machine A: The cash price of this machine was $38,500. Related expenditures included: sales tax $2,200, shipping costs $175, insurance during shipping $75, installation and testing costs $50, and $90 of oil and lubricants to be used with the machinery during its first year of operation. Solomon estimates that the useful life of the machine is 4 years with a $5,000 salvage value remaining at that time period.
Machine B: The recorded cost of this machine was $100,000. Solomon estimates that the useful life of the machine is 4 years with a $8,000 salvage value remaining at the end of that time period.
(a) Prepare the following or Machine A
(1) The journal entry to record its purchase on January 1, 2006.
(2) The journal entry to record annual depreciation at December 31, 2006, assuming the straight-line method of depreciation is used.
Please see the attached file.
1 Full working for amortizable cost and ...
This solution provides equations in Excel for amortizable cost and annual depreciation under a straight line method and general journal entries for purchase.