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[solution]: Problem 9-3A On January 1, 2014, Thao Company purchased the


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Problem 9-3A On 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 $38,700. Related expenditures included: sales tax $2,700, shipping costs $190, insurance during shipping $60, installation and testing costs $60, and $130 of oil and lubricants to be used with the machinery during its first year of operations. Thao estimates that the useful life of the machine is 5 years with a $5,100 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 $236,800. Thao estimates that the useful life of the machine is 4 years with a $14,800 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.)

1. The journal entry to record its purchase on January 1, 2014.
2. The journal entry to record annual depreciation at December 31, 2014.

No. Account Titles and Explanation Debit Credit
1.
2.

SHOW LIST OF ACCOUNTS
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Calculate the amount of depreciation expense that Thao should record for Machine B each year of its useful life under the following assumptions. (Round answers to 0 decimal places, e.g. $2,125. Round cost per unit to 2 decimal place, e.g. 1.25.)

(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 125,800 units. Actual usage is as follows: 2014, 47,100 units; 2015, 36,300 units; 2016, 25,600 units; 2017, 16,800 units.

2014 2015 2016 2017
Straight-line method $ $ $ $
Declining-balance method $ $ $ $
Units-of-activity method $ $ $ $
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(a) Prepare the following for Machine A

 


 

Purchase price

 

Sales tax

 

Shipping costs

 

Insurance during shipping

 

Installation and testing

 

Total cost of machine

 


 

38,700

 

2,700

 

190

 

60

 

60

 

41,710

 


 

Recorded...

 


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