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P9-3A _Thao Company _Depericiation Expense




Question;P9-3AOn January 1, 2014, Thao Company purchased the;following two machines for use in its production process.;Machine A: The cash price of this machine;was $35,000. Related expenditures included: sales tax $1,700, shipping costs;$150, insurance during shipping $80, installation and testing costs $70, and;$100 of oil and lubricants to be used with the machinery during its first year;of operations. Thao esti?mates that the useful life of the machine is 5 years;with a $5,000 salvage value remaining at the end of that time period. Assume;that the straight-line method of depreciation is used.;Machine B: The recorded cost of this;machine was $80,000. Thao estimates that the useful life of the machine is 4;years with a $5,000 salvage value remain?ing 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, 2014.;(2);The journal entry to record annual depreciation at December 31, 2014.;(b) Calculate the amount of depreciation;expense that Thao should record for Machine Beach year of its useful life under the;following assumptions.;(1) Thao uses the straight-line method of;depreciation..;(2) Thao uses the declining-balance;method. The rate used is twice the straight-line rate.;(3) Thao uses the units-of-activity method;and estimates that the useful life of the machine is 125,000 units. Actual;usage is as follows: 2014, 42,000 units, 2015, 35,000units, 2016, 28,000 units, 2017, 20,000;units.;(c) Which method used to calculate;depreciation on Machine B reports the highest amount of depreciation expense in;year 1 (2014)? The highest amount in year 4 (2017)? The highest total amount;over the 4-year period?


Paper#38267 | Written in 18-Jul-2015

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