Question

1. On May 28, Jackson Jones borrowed $40,000 cash and gave the lender a 5%, 90 day note. Which of the following is the correct journal entry to record the payment of the note on the maturity date?

2. A company had the following plant asset: New equipment cost $64,000 Salvage value 4,000 Useful life 5 years The machine is also expensed to produce 150,000 units during its useful life. Compute the depreciation expense for the year using the units of production method of depreciation assuming that 25,000 units were produced in year one.

Answer 1

Answer 1

I have taken 360 days for interest calculation

(If we take 365 days interest will be $493)

Date	Accounts and Explanation	Debit	Credit
August 26	Notes Payable	$40,000
	Interest Expense	$     500
	Cash		$    40,500
	(To record payment of Notes )

Interest = $40000 x 5% x 90/360

Answer 2

Depreciation for 1st year = $10000

Units of Production Method
Cost of Assets	$                            64,000
Life of Assets	5	Years
Residual value	$                              4,000
Estimated Units to be produced	150000	units
Depreciation = (Cost-Residual Value)/Life in miles	=(64000-4000)/150000
	=60000/150000
Depreciation per unit	$                                 0.40	Per Unit
Depreciation for 1st year = 25000*.40	$                            10,000

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