On january 1 2012 tiggy company purchased the following two

Assignment Help Financial Accounting

Reference no: EM13377932

On January 1, 2012, Tiggy 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 costs $150, unsurance 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. Tiggy 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 depreciation is used.

Machine B: The recorded cost of this machine was $160,000. Tiggy estimates that the useful life of the is 4 years with a $10,000 salvage value remaining at the end of that time period.

Instructions

(a) Prepare the following for Machine A.

(1) The journal entry to record its purchase on January 1, 2012.

(2) The journal entry to record annual depreciation at December 31, 2012.

(b) Calculate the amount of depreciation expense that Tiggy should record for Machine B each year of its useful life, under the following assumptions.

(1) Tiggy uses the straight-line method of depreciation.

(2) Tiggy uses the declining-balance method. The rate used is twice the straight-line rate.

(3) Tiggy uses the units-of-activity method and estimates that the useful life of the machine is 125,000 units. Actual usage is as follows: 2012, 45,000 units; 2013, 35,000 units; 2014, 25,000 units; 2015, 20,000 units.

(c) Which method used to calculate depreciation on Machine B reports the highest amount of depreciation expense in year 1 (2012)? The highest amount in year 4 (2015)?The highest total amount over the 4-year period?

Reference no: EM13377932

Questions Cloud

1 explain why relatively flat as opposite relatively steep : 1. explain why relatively flat as opposite relatively steep labor demand curves are more consistent with the empirical

Why are market based solutions to economic problems : why are market based solutions to economic problems preferable to others?why is the supply curve positively

Describe an ethical dilemma and its importance and : describe an ethical dilemma and its importance and relevance. identify the various stakeholders and their

The irony is that those who are aware of the pareto : the irony is that those who are aware of the pareto principle do not use it as often as they should in making

On january 1 2012 tiggy company purchased the following two : on january 1 2012 tiggy company purchased the following two machines for use in its production process.nbspmachine a

The law of demand states thata consumers buy a good based : the law of demand states thata. consumers buy a good based on many other factors other than the price of the goodb.

Rumblebuffin company was organized on january 1 during the : rumblebuffin company was organized on january 1. during the first year of operations the following plant asset

Presented below is an aging schedule for mccann : presented below is an aging schedule for mccann company.nbspabcdefg1customertotalnot yet duenumber of days past

Charles brown opened charlies house cleaners on march 1 : charles brown opened charlies house cleaners on march 1. during march the following transactions were

User Account

All Pages