At the beginning of the year, Grillo Industries bought three used machines from Freeman Incorporated. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Machine AMachine BMachine CCost of the asset$10,800 $40,000 $23,800 Installation costs 950 3,900 3,000 Renovation costs prior to use 750 3,500 4,000 Repairs after production began 700 900 2,500 By the end of the first year, each machine had been operating 8,000 hours. Required:Compute the cost of each machine.Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following: Estimates MachineLifeResidual ValueDepreciation MethodA5years $2,800 Straight-lineB20,000hours 2,400 Units-of-productionC10years 1,600 Double-declining-balance

Depreciation expense: Depreciation expense is a non-cash expense, which is recorded on the income…

Answered: At the beginning of the year, Grillo…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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At the beginning of the year, Grillo Industries bought three used machines from Freeman Incorporated. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts.

	Machine A	Machine B	Machine C
Cost of the asset	$	10,800		$	40,000	$	23,800
Installation costs		950			3,900		3,000
Renovation costs prior to use		750			3,500		4,000
Repairs after production began		700			900		2,500

By the end of the first year, each machine had been operating 8,000 hours.

Required:

Compute the cost of each machine.
Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following:

	Estimates
Machine	Life	Residual Value	Depreciation Method
A	5	years		$	2,800	Straight-line
B	20,000	hours			2,400	Units-of-production
C	10	years			1,600	Double-declining-balance

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