Hunt Company purchased factory equipment with an invoice price of $90,000 on Jan 1. Other costs incurred were freight costs, $1,100; installation wiring and foundation, $2,200; material and labor costs in testing equipment, $700; oil lubricants and supplies to be used with equipment, $500; fire insurance policy covering equipment, $1,400. The equipment is estimated to have a $5,000 salvage value at the end of its 8-year useful service life. Instructions

(a) Compute the acquisition cost of the equipment. Clearly identify each element of cost.

(b) If the double-declining-balance method of depreciation was used, show the journal entry to record depreciation expense for the first fiscal year on Dec. 31.

Question

Business

Carly Mullen

3 May, 12:01

Hunt Company purchased factory equipment with an invoice price of $90,000 on Jan 1. Other costs incurred were freight costs, $1,100; installation wiring and foundation, $2,200; material and labor costs in testing equipment, $700; oil lubricants and supplies to be used with equipment, $500; fire insurance policy covering equipment, $1,400. The equipment is estimated to have a $5,000 salvage value at the end of its 8-year useful service life. Instructions

(a) Compute the acquisition cost of the equipment. Clearly identify each element of cost.

(b) If the double-declining-balance method of depreciation was used, show the journal entry to record depreciation expense for the first fiscal year on Dec. 31.

+2

Answers (1)

Know the Answer?

Karson Henson · Answer 1

(a) $94,000

(b) 25%

Explanation:

Given:

Part (A)

Invoice price = $90,000

Freight cost = $1,100

installation wiring and foundation = $2,200

testing cost = $700

total acquisition cost = 90000+1100+2200+700 = $94,000

Part (B)

1/8 * 2 = 0.25 or 25%