In: Accounting
Correct Option is C) $2,167
Explanation:
Double Straight line depreciation = 2 * Straight line depreciattion percent * Book Value of asset
Straight Line Depreciation Percent(SLDP) = 100 / No. of useful life of asset.
Here , SLDP = 100 / 5 = 20%
Therefore , Double Straight Line Depreciation = 2 * 20% * $13,000
= $5,200
This year the asset was put in use from August 1,2019 , so only for that period the depreciation expense will be recorded = $5,200 * (5/12) = $2,166.66
Therefore Depreciation expense for 2019 is $2,167
Correct Option is D) Discount.
Explanation:
Isuue Price :
Present Value of 1 :
Ten year bond face value = $5,000,000
Semi-annual bond , period is 10 years but will be taken as 20 (10*2) . Therefore n = 20 years Interest rate (market) = 12% per annum . So per period rate = 6% (12/2). Thereofre i = 6%
Present Value of Interest factor,PVIF (20,6%) = 0.3118
So Present value of 1 = $5,000,000 * 0.3118
= $1,559,000
[ NOTE: The PVIF can also be rounded to 0.312, a slight amount will be changed in that case. I have taken upto 4 decimal places(0.3118) for more accurate calculations]
Now, Present Value of Annuity :
Total Interest = $5,000,000 * 10% * (6/12)
= $250,000
Present value of annuity,PVAF (20,6%) = 11.470
So, Present value of annuity = $250,000 * 11.470
= $2,867,500
TOTAL ISSUE PRICE OF BOND = $1,559,000 + $2,867,500 = $4,426,500
Therefore we can see that the bond was issued at less than the face value , which means it was issued at DISCOUNT