Let's break down the solution step-by-step:
1. Calculate the total cost of the machine:
- Initial cost of the machine: \[tex]$178,000
- Additional cost for wiring electricity: \$[/tex]2,840
- Additional cost for securing the machine: \[tex]$1,160
Total Cost of the Machine = \$[/tex]178,000 + \[tex]$2,840 + \$[/tex]1,160 = \[tex]$182,000
2. Determine the depreciation method and relevant values:
- Salvage value: \$[/tex]14,000
- Useful life: 6 years
- Depreciation method: Straight-line
3. Calculate the annual depreciation expense:
- Formula for straight-line depreciation:
[tex]\[
\text{Annual Depreciation} = \frac{\text{Total Cost} - \text{Salvage Value}}{\text{Useful Life}}
\][/tex]
Plugging in the values:
[tex]\[
\text{Annual Depreciation} = \frac{\$182,000 - \$14,000}{6} = \frac{\$168,000}{6} = \$28,000
\][/tex]
4. Prepare the journal entry for the first-year depreciation (December 31):
- Depreciation Expense: \[tex]$28,000
- Credit to Accumulated Depreciation: \$[/tex]28,000
The journal entry to record the depreciation expense for the first year is:
[tex]\[
\begin{tabular}{|c|c|c|c|}
\hline
\text{Date} & \text{General Journal} & \text{Debit} & \text{Credit} \\
\hline
\text{December 31} & \text{Depreciation Expense} & \$28,000 & \\
\hline
\text{} & \text{Accumulated Depreciation - Machine} & & \$28,000 \\
\hline
\end{tabular}
\][/tex]
To summarize, on December 31, you will record a debit to Depreciation Expense for \[tex]$28,000 and a credit to Accumulated Depreciation - Machine for \$[/tex]28,000. This reflects the allocation of the annual depreciation expense against the value of the machine for the first year.
