Question

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1)Use the adjusted trial balance for Stockton Company below to answer the questions that follow. Stockton...

1)Use the adjusted trial balance for Stockton Company below to answer the questions that follow.

Stockton Company
Adjusted Trial Balance
December 31

Cash	7,530
Accounts Receivable	2,100
Prepaid Expenses	700
Equipment	13,700
Accumulated Depreciation		1,100
Accounts Payable		1,900
Notes Payable		4,300
Common Stock		1,000
Retained Earnings		12,940
Dividends	790
Fees Earned		9,250
Wages Expense	2,500
Rent Expense	1,960
Utilities Expense	775
Depreciation Expense	250
Miscellaneous Expense	185
Totals	30,490	30,490

Determine the net income (loss) for the period.

	a.	net loss $790
	b.	net loss $5,670
	c.	net income $9,250
	d.	net income $3,580

2)

A machine with a cost of $360,000 has an estimated residual value of $10,000 and an estimated life of 5 years or 14,000 hours. It is to be depreciated by the units-of-output method. What is the amount of depreciation for the second full year, during which the machine was used 1,200 hours in the first year and 2,250 hours in the second year?

	a.	$56,250
	b.	$86,400
	c.	$70,000
	d.	$57,000

Expert Solution

Ques 1) We need to prepare the income statement for the year ended December 31 for calculating net income/(loss) which is shown as follows:- (Amounts in $)

Stockton Company
Income Statement
For The Year Ended December 31
Fees Earned (A)	9,250
Expenses:-
Wages Expense	2,500
Rent Expense	1,960
Utility Expense	775
Depreciation Expense	250
Miscellaneous Expense	185
Total Expenses (B)	5,670
Net Income (A-B)	3,580

Therefore the net income for the year is $3,580.

Hence the correct option is d) net income $3,580.

Ques 2) Depreciation Expense per hour = (Cost - Residual value)/Estimated life in hours

= ($360,000 - $10,000)/14,000 hrs = $25 per hour

Depreciation expense for second year = Hours for second year*Depreciation expense per hour

= 2,250 hrs*$25 per hour = $56,250

Therefore the amount of depreciation for the second full year is $56,250.

Hence the correct option is a) $56,250.

ekkarill92 answered 1 year ago

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