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On January 1, 2005, Solomon Company purchased the following two machines for use in its production process
On January 1, 2005, Solomon Company purchased the following two machines for use in its production process.
Machine A: The cash price of this machine was $38,500. Related expenditures included: sales tax $2,200, shipping costs $175, insurance during shipping $75, installation and testing costs $50, and $90 of oil and lubricants to be used with the machinery during its first year of operation. Solomon estimates that the useful life of the machine is 4 years with a $5,000 salvage value remaining at that time period.
Machine B: The recorded cost of this machine was $100,000. Solomon estimates that the useful life of the machine is 4 years with a $8,000 salvage value remaining at the end of that time period.
Instructions:
(a) Prepare the following or Machine A
(1) The journal entry to record its purchase on January 1, 2006.
(2) The journal entry to record annual depreciation at December 31, 2006, assuming the straight-line method of depreciation is used.
Expert Solution
please see the attached file.
Full working for amortizable cost and annual depreciation under straight line method with necessary notes regarding current operating charges.
General journal entries at 31st Dec 2006 for purchase of machinery A and depreciation for Machinery A and Machinery B.
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