Reference no: EM133164714
Question - At the beginning of the year, Jorgenson Companies bought a shed, a machine, and a trailer.
The shed initially cost $20,900 but had to be renovated at a cost of $660. The shed was expected to last 7 years, with a residual value of $1,750. Repairs costing $480 were incurred at the end of the first year of use.
The machine cost $11,550, and is estimated to have a total life of 40,000 hours and residual value of $900. The machine was actually used 2,000 hours in year 1 and 4,000 hours in year 2.
The trailer cost $11,900 and was expected to last 4 years, with a residual value of $2,000.
Required -
1. Compute the amount to be capitalized for the shed.
2. Compute year 2 straight-line depreciation expense for the shed and prepare the journal entry to record it.
3. Compute year 2 units-of-production depreciation expense for the machine.
4. Prepare the journal entry to record year 2 units-of-production depreciation expense for the machine.
5. Compute years 1 and 2 double-declining-balance depreciation expense for the trailer.
6. Prepare the journal entry to record year 2 double-declining balance depreciation expense for the trailer.