Reference no: EM132018602

Problem - Financial Statement and Income Tax Effects of Differing Depreciation Methods

Total Workout, Inc. purchased three fitness machines from Ace Used Equipment at the beginning of the year. All three were used machines. The machines had to be overhauled and installed before they were put into use. The costs of the machines and their renovation and installation are shown in Table 1 below:

$21,000	$30,750	$8,000
$500	$1,000	$200
$2,000	$1,000	$1,500

By the end of the first year, each machine had been operating 4,800 hours. Depreciation estimates are shown in Table 2 below:

Estimates

5 years	$1,000	Straight-line
60,000 hours	$2,000	Units-of-production
4 years	$1,500	Double-declining-balance

Using the data provided above, complete the following:

1. Compute the cost of each machine.

2. Give the entry to record depreciation expense at the end of the first year, using all three depreciation methods listed in Table 2.