Composite Depreciation - The Wilcox Company acquires four machines that have the following...

Question

Composite Depreciation - The Wilcox Company acquires four machines that have the following characteristics:

Machine

Cost

Estimated Residual Value

Estimated Service Life

A

$26,000

$2,000

6 years

B

19,000

1,000

9

C

30,000

5,000

5

D

28,000

—

7

Required
1. Prepare journal entries to record the acquisition and the first year’s depreciation, assuming that the composite method is used on a straight-line basis.
2. If the company sells machine B after four years for $10,000, prepare the journal entry.
3. What arguments may be used to support the composite depreciation method?

Robert · Accepted Answer

Machine 
   Cost   Residual Value Service Life Depreciated cost 
 Depreciation 
A $26,000  $2,000    6 years  24000  
 4000 
B 19,000  1,000  9  18000   2000 
C 30,000  5,000  5  25000   5000 
D 28,000  —  7  28000   4000
Required 
1. Prepare journal entries to record the acquisition and the first 
year’s depreciation, assuming that the composite method is used on a 
straight-line basis.

Composite Depreciation - The Wilcox Company acquires four machines that have the following characteristics: Machine Cost Estimated Residual Value Estimated Service Life A $26,000 $2,000 6 years B...

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