Question

6-10

A company purchased factory equipment for $250,000. It is estimated that the equipment will have a $25,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be

		$100,000
		$60,000
		$90,000
		$43,200

The maturity value of a $30,000, 8%, 3-month note receivable is

		$30,600
		$30,240
		$32,400
		$30,200

The following totals for the month of April were taken from the payroll register of Main Company. Salaries $24,000 FICA taxes withheld 1,100 Income taxes withheld 5,000 Medical insurance deductions 900 Federal unemployment taxes 64 State unemployment taxes 432 The journal entry to record the monthly payroll on April 30 would include a

		debit to Salaries Expense for $24,000
		credit to Salaries Payable for $24,000
		debit to Salaries Payable for $24,000
		debit to Salaries Expense for $17,000

Brown Company reported teh followign on the company's statement of cash flows in 2014 and 2013:

                2014      2013

Net cash flow from operating activities                          $476,000       $455,000

Net cash flow used for investing activities                      (427,000)      (378,000)

Net cash flow used for financing activities                    (42,000)          (58,800)

Eighty percent of the net cash flow used for investing activities was used to replace existing capactiy. What is the free cash flow for 2014?

		$134,400
		$152,600
		$455,000
		$476,000

The stockholders' equity section of a corporation's balance sheet consists of (1) paid-in capital, (2) retained earnings, and (3) drawings.

True

False

Answer 1

1.

100% / 5 = 20%

Double declining means 20% X 2 = 40% is the depreciation rate.

First year

$250,000 X 0.4 = $100,000

Book value: $250,000 - $100,000 = $150,000

Second year

$150,000 X 0.4 = $60,000

So B. $60,000

2.

maturity value = $30000 +$30000* 8%*3/12=$30600 3.

Salaries $24,000
Minus FICA Tax Withheld ($1,100)
Minus Income Taxes Withheld ($5,000)
Minus Medical Insurance Deductions ($900)
Equals Net Pay $17,000

4.

	2014	2013
Net Cash Flow from operating activities	476,000.00	455,000.00
Net Cash Flow from Investing activities	(427,000.00)	(378,000.00)
Capital Expenditure (80%)	(341,600.00)	(302,400.00)
Free Cash Flow Operating -80% of Investing	817,600.00	757,400.00
Free Cash flow is calculated as operating cash flow minus capital expenditures

5.

False, Since corporation is a body corporate there is no scope of drawings by the shareholders