In: Accounting
Tony and Suzie see the need for a rugged all-terrain vehicle to transport participants and supplies. They decide to purchase a used Suburban on July 1, 2022, for $15,000. They expect to use the Suburban for five years and then sell the vehicle for $6,000. The following expenditures related to the vehicle were also made on July 1, 2022:
The painting, roof rack, and hitch are all expected to increase the future benefits of the vehicle for Great Adventures. In addition, on October 22, 2022, the company pays $1,900 for basic vehicle maintenance related to changing the oil, replacing the windshield wipers, rotating the tires, and inserting a new air filter.
Great Adventures Problem AP7-1 Part 3
3. Prepare a depreciation schedule using the
straight-line method.
  
OS Environmental provides cost-effective solutions for managing regulatory requirements and environmental needs specific to the airline industry. Assume that on July 1 the company issues a one-year note for the amount of $5.4 million. Interest is payable at maturity.
Required:
OS Environmental provides cost-effective solutions for managing regulatory requirements and environmental needs specific to the airline industry. Assume that on July 1 the company issues a one-year note for the amount of $5.4 million. Interest is payable at maturity.
Required:
Determine the amount of interest expense that should be recorded in a year-end adjusting entry under each of the following independent assumptions: (Enter your answers in dollars, not in millions (i.e. 5 should be entered as 5,000,000).)
11% ar DEcember 31
8% at September 30
10% at October 31
7% at January 32
| Purchase price | $ 15,000 | 
| Add:painting of asset | $ 6,000 | 
| Add:deluxe roof back | $ 2,750 | 
| Cost of new vehicle | $ 23,750 | 
| Depreciable cost($23,750-$6,000) | $ 17,750 | 
Straight line depreciation schedule:
| Date | cost | depreciable cost | useful life | depreciable rate | depreciable expense | accumulated depreciation | Book value | 
| Year 1-6 months | $23,750 | $17,750 | 5 years | 0.10 | $1,775 | $1,775 | $21,975 | 
| Year 2 | $23,750 | $17,750 | 5 years | 0.20 | $3,550 | $5,325 | $18,425 | 
| Year 3 | $23,750 | $17,750 | 5 years | 0.20 | $3,550 | $8,875 | $14,875 | 
| Year 4 | $23,750 | $17,750 | 5 years | 0.20 | $3,550 | $12,425 | $11,325 | 
| Year 5 | $23,750 | $17,750 | 5 years | 0.20 | $3,550 | $15,975 | $7,775 | 
| Year 6-6 months | $23,750 | $17,750 | 5 years | 0.10 | $1,775 | $17,750 | $6,000 | 
Solution 2:
Interest expense is calculated as below:
| 1 | 2 | 3 | 4 | |
| Interest rate | 11% | 8% | 10% | 7% | 
| Fiscal year end | December 31 | september 30 | October 31 | January 31 | 
| Interst expense | 
 $220,000 ($4,000,000*6/12*11%)  | 
 $80,000 ($4,000,000*3/12*8%)  | 
 $133,333 ($4,000,000*4/12*10%)  | 
 $163,333 ($4,000,000*7/12*7%)  |