final review session problems

# final review session problems - Problem 1 On January 1 2008...

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Problem 1 On January 1, 2008, Arlo Company purchased the following two machines for use in its production process: Machine A: The cash price of this machine was \$55,000. Related expenditures included: sales tax \$2,750, shipping costs \$100, insurance during shipping \$75, installation and testing costs \$75, and \$90 of oil and lubricants to be used with the machinery during its first year of operation. Arlo estimates that the useful life of the machine is 4 years with a \$5,000 salvage value remaining at the end of that time period. Machine B: The recorded cost of this machine was \$100,000. Arlo estimates that the useful life of the machine 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, 2008. (2) The journal entry to record annual depreciation at December 31, 2008, assuming the straight-line method of depreciation is used. (b)

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