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?