On January 1, 2018, Alike Company purchased the following two machines for use in its...
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Accounting
On January 1, 2018, Alike Company purchased the following two machines for use in its production process.
Machine A - The cash price of this machine was $38,000. Related expenditures included: sales tax $1,700, shipping cost $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. Alkek estimates 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 deprivation is used.
Machine B - The recorded cost of this machine was $160,000. Alike estimates that the useful life of the machine is 4 years with a $10,000 salvage value remaining at the end of that time period.
Calculate the amount of deprecation expense that Alike Company should record for machine A and B (separately) for each year of its useful life under the following assumptions.
(a) Alike uses the straight-line method of deprecation.
(b) Alike uses the declining-balance method. The rate used is twice the straight-line method.
(c) Alike uses the units-of-activity method and estimates that the useful life of the machine is
125,000 units. Actual usage is as follows: 2017 = 45,000 units; 2018 = 35,000 units; 2019 = 25,000 units; 2020 = 16,000 units; 2021 = 4,000 units
\begin{tabular}{|c|c|c|c|c|c|c|} \hline Column1 & Column2 & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 \\ \hline Aa & Straight Line & & & & & \\ \hlineAb & Declining Balance & & & & & \\ \hline Ac & Units-of-Activity & & & & & \\ \hline Column1 & Column2 & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 \\ \hline Ba & Straight Line & & & & & \\ \hlineBb & Declining Balance & & & & & \\ \hline Bc & Units-of-Activity & & & & & \\ \hline \end{tabular}
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