Reference no: EM13378300

You are a staff accountant in a CPA firm. Your manager has asked you to provide a report containing accounting information on the following 3 clients:

Global Inc. purchased a machine and incurred the following expenditures:

Purchase price	$20,000
Freight costs	$1,000
Sales tax	$2,000
Insurance on shipment	$200
Insurance for the first year on the machine	$500
Installation of the machine	$2,000

• Calculate the cost to be capitalized.
• Make an entry that will show which expenses will be capitalized when recording the machine on the books.
• Show the entry that will be recorded to expense the cost that will not be capitalized.

Brands Resources traded an old machine for a new machine. The book value of the old machine was $150,000 (original cost $320,000, less accumulated depreciation of $170,000). The fair value was $180,000. Brands Resources paid $20,000 to complete the exchange.

• Prepare the journal entry to record the exchange.

Reliable Company purchased a machine on January 1, 2008 at a net cost of $85,000. At the end of the 4-year life, it expects the machine will have a salvage value of $5,000. It also estimates that the machine will run for 10,000 hours during its 4-year life. The company has a fiscal year that ends on December 31.

Year	Machine hours
2008	2,000
2009	3,000
2010	1,000
2011	4,000

• Calculate the depreciation under the straight line method.
• Calculate the depreciation under the double declining method.
• Calculate the depreciation under the units of production method.