Answer:
1) Journal Entry
Debit Depreciation Expense $11,714 Credit Accumulated Depreciation on : Machine A $3,400, Machine B $2,500 Machine C $5,814
Explanation
Machine A Machine B Machine C
Purchase Price $22,900 $32,100 $19,550
Installation cost $1,900 $2,400 $900
Renovation cost $4,200 $3,000 $1,600
Total Cost $29,000 $37,500 $22,050
Residual Value -$1,800 -$3,000 -$1,700
Depreciable value $27,200 $34,500 $20,350
Depreciation method:
Straight line = (Cost- Residual Value)/useful life = 27,200/8 yrs = $3,400
Units of production = Depreciable value * units produced / total units that can be produced over the life = 34,500 * 5,000/69,000 =$2,500
Double declining Balance = 2 * (cost of asset - Residual Value ) /Useful life
= 2*(20,350/7) = $5,814
Depreciation Expense = $3,400 + $2,500 + $5,814 = $11,714
To get total cost, we add all the costs incurred for the asset to be in the location where it will operate in and also add the cost incurred to make the Asset be in a working Condition.
Depreciation value = cost - residual value
Depreciation expense is recorded at total only accumulated depreciation is separated.
