Intro

Satisfactory Essays
Financial Accounting Principles Name: ___________________________
Quiz 3 Worth 30 Points

1. A machine was purchased for $37,000 and depreciated for five years on a straight-line basis under the assumption it would have a ten-year life and a $1,000 salvage value. At the beginning of the machine's sixth year it was recognized the machine had three years of remaining life instead of five and that at the end of the remaining three years its salvage value would be $1,600. What amount of depreciation should be recorded in each of the machine's remaining three years? Please show all your calculations. (10 Points)

2. On July 1 of the current year, a company purchased and placed in service a machine with a cost of $240,000. The company estimated the machine's useful life to be four years or 60,000 units of output with an estimated salvage value of $60,000. During the current year, 15,000 units were produced. (15 Points)

Prepare the necessary December 31 adjusting journal entry to record depreciation for the current year assuming the company uses:

a. The straight-line method of depreciation
b. The units-of-production method of depreciation
c. The double-declining balance method of depreciation
3. A company purchased a special purpose machine on August 1 of the past year, and it was installed and ready to run on January 1 of this year. The following costs were incurred in the purchase and installation of the machine. (5 Points)

Invoice price $1,200,000
Freight costs 6,000
Installation costs 64,000
Electrical and power connections 32,000
Repairs to correct damage incurred during uncrating 12,000
Costs to adjust machine to appropriate specifications 56,000
Spare parts for future use 108,000
Sales tax 70,500
Fines incurred during transport of machine 400
Cost of special foundation required for machine installation 28,500

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