I know how to do the second part of the problem, but I am having trouble computing the cost of each machine.
What I did was add 14,000+600+600 and didn't include insurance cost. I did them all the same, but apparently that isn't right.. Any help/explanation would be apprecialted


Problem 3
At the beginning of the year, a company bought three new machines for its production facilities. The machines were all different so each had to be recorded separately. Below are the costs related to each purchase.

Machine A Machine B Machine C
Amount paid for the machine 14,000 28,500 11,200
Installation cost 600 1,000 400
Delivery cost 600 800 600
Insurance cost 450 600 400

At the end of the first year, each machine had been operated 5,200 hours

Required:
1. Compute the cost of each machine.
2. Prepare the journal entry to record depreciation expense at the end of year 1, assuming the following:

Machine Life Residual Value Depreciation Method
A 6 years 1,000 Straight-line
B 50,000 hours 2,000 Units-of-production
C 5 years 1,000 Double-declining-balance

It is unusual to capitalise insurance cost but I expect the assumption is the cost is for the life of the machine. In the case of depreciation method A this approach doesn't distort a time based allocation of costs associated with the matching concept, however it may lead to such distortions in method B and C

Quote:

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Originally Posted by paraclete

It is unusual to capitalise insurance cost but I expect the assumption is the cost is for the life of the machine. In the case of depreciation method A this approach doesn't distort a time based allocation of costs associated with the matching concept, however it may lead to such distortions in method B and C

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I don't understand? Did I calculate the first cost correctly? Or am I supposed to calculate the depreciation first, and then find the cost?

Be sensible how do you calculate the deprteciation without knowing the cost, think of a number?

By the methodology I would use you did it right but they are teaching some weird things these days, not for praticality but to give the students exercise