Question

In: Accounting

Ram Corporation purchased a new truck on January 1, 2020 for $50,000.  The truck is expected to...

Ram Corporation purchased a new truck on January 1, 2020 for $50,000.  The truck is expected to last five years with a residual value of $10,000.  Using straight-line depreciation, show the effect on the income statement and balance sheet of this transaction over the next five years.

Income statement

2020                 2021                 2022                 2023                 2024

Depreciation expense    $8000               $8000               $8000               $8000               $8000

Balance Sheet

2020                 2021                 2022                 2023                 2024

Equipment                    $                      $                      $                      $                      $

Less: accumulated

  Depreciation               (                   )       (                 )       (                 )        (                 )        (                  )

Book value                    $                      $                      $                      $                      $

                                                                                                                                                            

Part II – Chapter 8

                                    Company A                   Company B                   Company C

Days sales in receivables            8.3 days                        39.9 days                      60.3 days

Days sales in inventory              2.3 days                        45.8 days                      95.8 days

Debt/equity ratio                      34.8%                           107.5%                         62.3%

Times interest earned               14.5 times                    7.8 times                      4.5 times

Gross profit margin                   37%                              70%                              20%

Price/earnings ratio                   15                                3                                  18

Bold the correct answer in each of the questions below.

1)  Refer to the days sales in inventory.  If one of the companies above is McDonald's, one is Apple, and one is BMW Auto Sales, which is likely BMW?                             

            A             B            C   

2)  Which company is best able to meet its interest obligations?             

            A             B            C   

3)  If one of the companies above sells primarily on net 45 day sales terms with no discount offered for early payment, which is it likely to be?

            A             B            C   

4)  Assume one company is McDonald's, one is Wal-Mart, and the other is a high end jeweler, which is likely the jeweler?

            A             B            C   

5)  Which company has the least percentage of assets financed by owners?

            A             B            C   

6)  Which company apparently has investors worried about its future?

            A             B            C   

Solutions

Expert Solution

Dear student, we cannot able to post solution more than one question as per our policy.

Answer

Income Statement: 2020 2021 2022 2023 2024
Depreciation expense $           8,000 $            8,000 $            8,000 $            8,000 $            8,000
Balance Sheet: 2020 2021 2022 2023 2024
Equipment $        50,000 $          50,000 $          50,000 $          50,000 $          50,000
Less: accumulated depreciation $           8,000 $          16,000 $          24,000 $          32,000 $          40,000
Book value $        42,000 $          34,000 $          26,000 $          18,000 $          10,000

Calculation

Cost of assets $        50,000
Less: residual value $        10,000
Depreciable cost $        40,000
Divided: useful life in Years                       5
Annual depreciation expense $           8,000
Accumulated depreciation 2020 2021 2022 2023 2024
Beginning accumulated depreciation $                   0 $            8,000 $          16,000 $          24,000 $          32,000
Add: Depreciation expense $           8,000 $            8,000 $            8,000 $            8,000 $            8,000
Ending accumulated depreciation $           8,000 $          16,000 $          24,000 $          32,000 $          40,000

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Three different companies each purchased trucks on January 1, 2018, for $50,000. Each truck was expected...
Three different companies each purchased trucks on January 1, 2018, for $50,000. Each truck was expected to last four years or 200,000 miles. Salvage value was estimated to be $5,000. All three trucks were driven 66,000 miles in 2018, 42,000 miles in 2019, 40,000 miles in 2020, and 60,000 miles in 2021. Each of the three companies earned $40,000 of cash revenue during each of the four years. Company A uses straight-line depreciation, company B uses double-declining-balance depreciation, and company...
On January 1, 2020, Land’s End Construction purchased a used truck for $52,500. A new motor...
On January 1, 2020, Land’s End Construction purchased a used truck for $52,500. A new motor had to be in- stalled to get the truck in good working order; the costs were $21,000 for the motor and $7,500 for the labour. The truck was also painted for $6,000. It was ready for use by January 4. A 12-month insurance policy costing $5,100 was purchased to cover the vehicle. The driver filled it with $225 of gas before taking it on...
Swifty Company purchased a delivery truck for $26,000 on January 1, 2020. The truck has an...
Swifty Company purchased a delivery truck for $26,000 on January 1, 2020. The truck has an expected salvage value of $1,000, and is expected to be driven 100,000 miles over its estimated useful life of 10 years. Actual miles driven were 12,800 in 2020 and 12,000 in 2021. Calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.) Depreciation expense $ per mile eTextbook and Media List of Accounts Compute depreciation expense for 2020...
Mahoney Moving Corporation purchased a new moving truck on January 2, 2014, for $95,000. The truck...
Mahoney Moving Corporation purchased a new moving truck on January 2, 2014, for $95,000. The truck was expected to have a useful life of 4 years and a residual value of $15,000. The company estimated that the moving truck would be driven for a total of 20,000 miles. It was driven for 5,000 miles in 2014, 6,000 miles in 2015, 4,000 miles in 2016, and 5,000 miles in 2017. The company’s fiscal year ends on December 31. Required: 1. Complete...
On January 1, 2020, Concord Corporation purchased a new machine for $4130000. The new machine has...
On January 1, 2020, Concord Corporation purchased a new machine for $4130000. The new machine has an estimated useful life of nine years and the salvage value was estimated to be $143000. Depreciation was computed using the sum-of-the-years'-digits method. What amount should be shown in Concord's balance sheet at December 31, 2021, net of accumulated depreciation, for this machine? $2535200 $3987000 $3332600 $2623800
Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected...
Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given below. The company's cost of capital is 12.5 percent. Year/ Annual Operating Cash Flow/ Salvage Value 0/ $22,500/ $22,500 1/ 6,250/ 17,500 2/ 6,250/ 14,000 3/ 6,250/ 11,000 4/ 6,250/ 5,000 5/...
The Parker Piano Company purchased a Delivery Truck on January 1, 2025 for $50,000 which included...
The Parker Piano Company purchased a Delivery Truck on January 1, 2025 for $50,000 which included all costs to get the asset ready for use. The truck has an anticipated life of 100,000 miles or 4 years. The estimated residual value at the end of the assets service life is expected to be $2,000. For assets of this type, the company utilizes the straight-line depreciation method. Record the purchase of the asset. Date Account Name Debit Credit Complete the depreciation...
The Parker Piano Company purchased a Delivery Truck on January 1, 2025 for $50,000 which included...
The Parker Piano Company purchased a Delivery Truck on January 1, 2025 for $50,000 which included all costs to get the asset ready for use. The truck has an anticipated life of 100,000 miles or 4 years. The estimated residual value at the end of the assets service life is expected to be $2,000. For assets of this type, the company utilizes the straight-line depreciation method. Record the purchase of the asset. Date Account Name Debit Credit Complete the depreciation...
Utley Corp purchased a new truck on January 1, 2013. The truck cost $30,000, has an...
Utley Corp purchased a new truck on January 1, 2013. The truck cost $30,000, has an estimated life of eight years, and has an estimated residual value of $6,000. Utley Corp uses the double-declining-balance method to compute depreciation. 14.value: 3.00 pointsRequired information What is Utley Corp's adjusted balance in its Accumulated Depreciation account at the end of 2014? $13,125. $3,750 $11,250. $1,875
Bridgeport Company purchased a delivery truck for 27,000 on January 1,2020. The truck has an expected...
Bridgeport Company purchased a delivery truck for 27,000 on January 1,2020. The truck has an expected salvage value 1,500, and is expected to be driven 102,000 miles over its estimated useful life of 10 years. Actual miles driven were 12,800 in 2020 and 14,300 in 2021 Compute depreciation expense for 2020 and 2021 using the straight-line method, the units-of-activity method, and the double-declining-balance method
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT