# Compute depreciation under different methods. On January 1, 2017, Pele SA purchased the following…

Compute depreciation under different methods.

On January 1, 2017, Pele SA purchased the following two machines for use in its production process.

Instructions

(a) Prepare the following for Machine A.

(1) The journal entry to record its purchase on January 1, 2017.

(2) The journal entry to record annual depreciation at December 31, 2017.

(b) Calculate the amount of depreciation expense that Pele should record for Machine B each year of its useful life under the following assumptions.

(1) Pele uses the straight-line method of depreciation.

(2) Pele uses the declining-balance method. The rate used is twice the straight-line rate.

(3) Pele uses the units-of-activity method and estimates that the useful life of the machine is 125,000 units. Actual usage is as follows: 2017, 42,000 units; 2018, 37,000 units; 2019, 28,000 units; and 2020, 18,000 units.

(c) Which method used to calculate depreciation on Machine B reports the highest amount of depreciation expense in year 1 (2017)? The highest amount in year 4 (2020)? The highest total amount over the 4-year period?

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