Question

At the beginning of the year, Grillo Industries bought three used machines. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Details for Machine A are provided below.

Cost of the asset $9,000
Installation costs 800
Renovation costs prior to use 600
Repairs after production began 500
7. Prepare the journal entry to record year 2 double-declining balance depreciation expense for Machine C, which has a cost of $25,400, an estimated life of 10 years, and $1,400 residual value.

Answer 1

To calculate the double-declining balance depreciation expense for Machine C, divide 2 by the useful life and multiply by the beginning book value minus accumulated depreciation. The journal entry would record the depreciation expense and accumulated depreciation for Machine C.

Step-by-step explanation:

To calculate the double-declining balance depreciation expense for Machine C, we need to determine the annual depreciation rate. The formula for the double-declining balance method is:

(2 / useful life) * (beginning book value - accumulated depreciation)

First, we calculate the annual depreciation rate:

Annual depreciation rate = (2 / useful life)

= (2 / 10) = 0.2

Next, we calculate the beginning book value of Machine C:

Beginning book value = Cost - Accumulated depreciation

= $25,400 - $0 = $25,400

Finally, we calculate the double-declining balance depreciation expense:

Depreciation expense = Annual depreciation rate * Beginning book value

= 0.2 * $25,400

= $5,080

The journal entry to record the year 2 double-declining balance depreciation expense for Machine C would be:

Depreciation Expense - Machine C $5,080

Accumulated Depreciation - Machine C $5,080

Answer 2

It is to be noted that the journal entry is:
Debit Credit

Depreciation Expense ≈ 3,895.67

Accumulated Depreciation ≈ 3,895.67

1. Calculate Annual Depreciation:

- Annual Depreciation = (2 * (Cost - Residual Value)) / Estimated Life

- Annual Depreciation = (2 * (25,400 - 1,400)) / 10

- Annual Depreciation = (2 * 24,000) / 10

- Annual Depreciation = 48,000 / 10

- Annual Depreciation = 4,800

2. Calculate Year 2 Depreciation:

- Year 2 Depreciation = Annual Depreciation * (Remaining Book Value / Cost)

- Year 2 Depreciation = 4,800 * (20,600 / 25,400)

- Year 2 Depreciation ≈ 3,895.67

3. Journal Entry: Debit Credit

- Depreciation Expense ≈ 3,895.67

- Accumulated Depreciation ≈ 3,895.67

This journal entry records the year 2 double-declining balance depreciation expense for Machine C, considering its cost, estimated life, and residual value.