Chapter 8 Optional Problem Solutions
P8–3.
Req. 1
Cost of each machine:
Machine
A
B
C
Total
Purchase price.
....................................
$7,600
$25,600
$6,800
$40,000
Installation costs.
.................................
300
500
200
1,000
Renovation costs.
................................
2,000
400
600
3,000
Total cost.
.........................................
$9,900
$26,500
$7,600
$44,000
Req. 2
Computation of depreciation at the end of year 1 for each machine:
Machine
Method
Computation
A
Straightline
($9,900

$1,500) x 1/5 years = $1,680
B
Unitsofproduction
($26,500

$900)
÷
20,000 hours = $1.28
$1.28 x 2,000 hours = $2,560
C
Doubledecliningbalance
($7,600

0) x 2/4 years = $3,800
Adjusting entry:
Depreciation expense ($1,680 + $2,560 + $3,800) (+E,

SE)
8,040
Accumulated depreciation, Machine A (+XA,

A)
1,680
Accumulated depreciation, Machine B (+XA,

A)
2,560
Accumulated depreciation, Machine C (+XA,

A)
3,800