Expenditures After Acquisition
Roanoke Manufacturing placed a robotic arm on a large assembly
machine on January 1, 2019. At that time, the assembly machine was
expected to last another 3 years. The following information is
available concerning the assembly machine.
| Cost, assembly machine | $750,000 |
| Accumulated depreciation, 1/1/2019 | 480,000 |
The robotic arm cost $210,000 and was expected to extend the useful life of the machine by 3 years. Therefore, the useful life of the assembly machine, after the arm replacement, is 6 years. The assembly machine is expected to have a residual value of $114,000 at the end of its useful life.
Required:
1. Prepare the journal entry necessary to record the addition of the robotic arm.
| 2019 Jan. 1 | Equipment | ||
| Cash | |||
| (Addition to assembly machine) |
Feedback
1. Capital expenditures increase the future economic benefits of
an asset by extending the useful life, increasing efficiency, or
improving the quality of the product. They are capitalized as part
of the asset.
Revenue expenditures do not increase the future economic benefits
of the asset. They are expensed in the current period.
2. Compute 2019 depreciation expense for the
machine using the straight-line method.
$
Feedback
Incorrect
Prepare the necessary journal entry to record depreciation expense for 2019.
| 2019 Dec. 31 | Depreciation Expense | ||
| Accumulated Depreciation | |||
| (Record depreciation expense) |
Feedback
2. Straight-line depreciation allocates the depreciable cost over the useful life of the asset.
3. What is the book value of the machine at the
end of 2019?
$
1.journal entry to record the addition of robotic arm.
| 2019 jan 1 | Equipment a/c | 210,000 | |
| ...........To Cash a/c | 210,000 | ||
| (addition to assembly machine) | |||
2.to record depreciation expense:
| 2019 dec 31 | depreciation expense | 61,000 | |
| ............To Accumulated deprecition | 61,000 | ||
annual depreciation = (750,000 - 480,000 +210,000 - 114,000) / 6 years.
=>366,000/ 6 years
=>$61,000.
3.book value of machine at the end of 2019:
| cost assembly machine (750,000+210,000) | 960,000 |
| less:accumulated depreciation (480,000+61,000) | (541,000) |
| book value of machine at end of 2019 | 419,000 |
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