Question

In: Accounting

Accounts payable 2,300 Accounts Receivable 1,500 Accumulated depreciation - Equipment 4,000 Cash 2,600 Common Stock 4,800...

Accounts payable

2,300

Accounts Receivable

1,500

Accumulated depreciation - Equipment

4,000

Cash

2,600

Common Stock

4,800

Equipment

7,500

Inventory

400

Land

10,000

Land held as long term investment

8,000

Notes payable (due in 5 Years)

6,000

Patent

2,500

Retained Earnings 1/1

16,000

Short- term investments

1,000

Wages Payable

400

Required: Calculate following amounts. Show all work.

  1. Total Current Assets (in order of liquidity)

  2. Total property, plant, and equipment

  3. Total Assets

  4. Total Current liabilities

  5. Total Liabilities

  6. Total Stockholders equity

  • Prove that A=L+SE with answers calculated above


#4

A corporation purchased a truck for $86,000. The company expected the truck to last for 5 years or 100,000 miles, with an estimated value of $5,000 at the end of that time. During the second year, the truck was driven 18,000 miles. Compute depreciation for the second year under each of the methods below.

Show all work

  1. Straight-line

  2. Double-declining balance

  3. Unity of Activity

Solutions

Expert Solution

Answer :

1. Calculation of following amounts :

a. Total Current Assets (in order of liquidity) :

= Cash + Short term investment + Accounts receivable + Inventory

= $2,600 + $1,000 + $1,500 + $400

= $5,500

b. Total property, plant, and equipment :

= Land + Land held as long term investment + Patent + Equipment - Accumulated depreciation - Equipment

= $10,000 + $8,000 + $2,500 + $7,500 - $4,000

= $24,000

c. Total Assets :

= Total Current Assets + Total property, plant, and equipment

= $5,500 + $24,000

= $29,500

d. Total Current liabilities :

= Accounts payable + Wages Payable

= $2,300 + $400

= $2,700

e. Total Liabilities :

= Total Current liabilities + Notes payable (due in 5 Years)

= $2,700 + $6,000

= $8,700

f. Total Stockholders equity :

= Common Stock + Retained Earnings 1/1

= $4,800 + $16,000

= $20,800

Total Assets = Total liabilities + Total Stockholders equity

$29,500 = $8,700 + $20,800

$29,500 = $29,500

2. Calculation of Depreciation for the second year under each of the methods :

1. Straight line method : Depreciation same for every year

Depreciation = (Cost - Residual value) / Life of asset

= ($86,000 - $5,000) / 5 years

= $81,000 / 5 years

= $16,200

Depreciation for second year = $16,200

2. Units of production method :

Depreciation = ($86,000 - $5,000) / 100,000 miles x 18,000 miles

= $81,000 / 100,000 miles x 18,000 miles

= 0.81 x 18,000 miles

= $14,580

3. Double Declining balance method :

Depreciation rate = 100% / Life of asset x 2

= 100% / 5 x 2

= 40%

Depreciation for first year = $81,000 x 40% = $32,400

Depreciation for second year

= ($81,000 - $32,400) x 40%

= $19,440

ekkarill92 answered 2 years ago
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