On January 1, 2020, Marigold Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine was $41,000. Related expenditures included: sales tax $1,650, shipping costs $200, insurance during shipping $50, installation and testing costs $90, and $200 of oil and lubricants to be used with the machinery during its first year of operations. Marigold estimates that the useful life of the machine is 5 years with a $4,400 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 $180,000. Marigold estimates that the useful life of the machine is 4 years with a $9,750 salvage value remaining at the end of that time period. Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. 2,125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) 1. The journal entry to record its purchase on January 1, 2020. 2. The journal entry to record annual depreciation at December 31, 2020. No. Account Titles and Explanation Debit Credit 1. 2.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 10E: Hathaway Company purchased a copying machine for 8,700 on October 1, 2019. The machines residual...

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On January 1, 2020, Marigold Company purchased the following two machines for use in its production process.

Machine A:		The cash price of this machine was $41,000. Related expenditures included: sales tax $1,650, shipping costs $200, insurance during shipping $50, installation and testing costs $90, and $200 of oil and lubricants to be used with the machinery during its first year of operations. Marigold estimates that the useful life of the machine is 5 years with a $4,400 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 $180,000. Marigold estimates that the useful life of the machine is 4 years with a $9,750 salvage value remaining at the end of that time period.

Prepare the following for Machine A. (Round answers to 0 decimal places, e.g. 2,125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

1.		The journal entry to record its purchase on January 1, 2020.
2.		The journal entry to record annual depreciation at December 31, 2020.

No.	Account Titles and Explanation	Debit	Credit
1.

2.

PART 2: Calculate the amount of depreciation expense that Marigold should record for Machine B each year of its useful life under the following assumptions. (Round depreciation cost per unit to 2 decimal places, e.g. 12.25. Round final answers to 0 decimal places, e.g. 2,125.)

(1)		Marigold uses the straight-line method of depreciation.
(2)		Marigold uses the declining-balance method. The rate used is twice the straight-line rate.
(3)		Marigold uses the units-of-activity method and estimates that the useful life of the machine is 175,900 units. Actual usage is as follows: 2020, 59,000 units; 2021, 48,000 units; 2022, 37,000 units; 2023, 31,900 units.

	Depreciation Expense
	2020	2021	2022	2023
Straight-line method	$	$	$	$
Declining-balance method	$	$	$	$
Units-of-activity method	$	$	$	$

PART 3:

Which method used to calculate depreciation on Machine B reports the highest amount of depreciation expense in year 1 (2020)?



The highest amount in year 4 (2023)?



The highest total amount over the 4-year period?

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