Disposal of Fixed Asset

Equipment acquired on January 6 at a cost of $422,300, has an estimated useful life of 9 years and an estimated residual value of $55,100.

a. What was the annual amount of depreciation for the Years 1-3 using the straight-line method of depreciation?

Year

Depreciation Expense

Year 1

$

Year 2

$

Year 3

$

b. What was the book value of the equipment on January 1 of Year 4?

$

c. Assuming that the equipment was sold on January 3 of Year 4 for $284,900, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

d. Assuming that the equipment had been sold on January 3 of Year 4 for $305,900 instead of $284,900, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

A stock market investor is interested in determining whether there is a significant difference in the P/E (price to earnings) ratio for companies from one year to the next. Six companies are randomly selected and their P/E ratios for Year 1 and Year 2 are recorded. Are the P/E ratios for Year 1 greater than for Year 2? Use a 10% level of significance.

Find the standard deviation of the differences.

5. State the critical value which separates the acceptance and rejection regions.
6. Evaluate the test statistic.
7. Would you accept or reject the hypothesis? Explain why you made the decision you did.

Ringmeup Inc. had net income of $112,800 for the year ended December 31, 2019. At the beginning of the year, 36,000 shares of common stock were outstanding. On May 1, an additional 14,000 shares were issued. On December 1, the company purchased 4,800 shares of its own common stock and held them as treasury stock until the end of the year. No other changes in common shares outstanding occurred during the year. During the year, Ringmeup paid the annual dividend on the 6,000 shares of 3.30%, $100 par value preferred stock that were outstanding the entire year.

Required:
Calculate basic earnings per share of common stock for the year ended December 31, 2019. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

On January 1 year 1, superstar company leased a building to pzed  Inc. The lease arrangement is for 20 years. The building is expected to have no residual value at the end of the lease. The leased building has a cost of $21,000,000 and was purchased for cash on January 1, year 1. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. Lease payments are $1,778,000 per year and are made at the beginning of the year. Superstar has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Pzed. Both the lessor and the lessee are on a calendar-year basis.

1) Prepare the journal entries that superstar company should make in 2 year 1

2) Prepare the journal entries that PZED should make in Year 1.

A machine costing $209,200 with a four-year life and an estimated $18,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 478,000 units of product during its life. It actually produces the following units: 123,000 in 1st year, 124,100 in 2nd year, 121,200 in 3rd year, 119,700 in 4th year. The total number of units produced by the end of year 4 exceeds the original estimate—this difference was not predicted. (The machine must not be depreciated below its estimated salvage value.)

Required:

Compute depreciation for each year (and total depreciation of all years combined) for the machine under each depreciation method. (Round your per unit depreciation to 2 decimal places. Round your answers to the nearest whole dollar.)

Dow Chemical is considering a project that is expected to last 4 years with the following details: Year 1 revenues of $560,000 increasing at 5% per year thereafter. Costs for year 1 are $200,000 and are expected to increase at 6% per year thereafter. The project will require new equipment valued at $400,000. This equipment will be depreciated to zero using the straight-line depreciation method over the 4-year life. Working capital at the firm will have to rise to $50,000 from the current level of $10,000 immediately, will fall down to $30,000 in year 2 and back to the original $10,000 level in year 4. The firm’s average tax rate is 24% and its marginal tax rate is 38%. Forecast all incremental CFs for this project and compute its NPV based on a discount rate of 12%.

Gent Manufacturing Company purchased Equipment for $950,000 on January 4, 2015. The Equipment has an estimated useful life of five years and an estimated residual value of $60,000. The Equipment, which should last 50,000 hours, was operated 9,000 hours in 1; 8,500 hours in year 2; 12,000 in year 3; 10,500 in year 4; and 10,000 in year 5.

1. Computer the annual depreciation each year assuming the following depreciation methods: straight-line and double declining balance.

2. A) If the Equipment is sold for $300,000 after year 3, what would be the amount of gain or loss under the double-declining balance method?

B) f the Equipment is sold for $300,000 after year 3, what would be the amount of gain or loss under the straight line method?

Info given: Interest is expected to be 10% per year unless stated otherwise. Effective tax rate is 38% (Not necessary needed).

Hugo wants to purchase a Diamond Cutting Diamond Cutter, which costs $40,000 to purchase and $10,000 per year to operate. The operating costs increase by 10% per year every year after year 1. The machine has no salvage value, and a 20-year life.

A) What is the equivalent uniform annual cost of the Diamond Cutting Diamond Cutter machine over its entire life?

B) If the purchase price of the Diamond Cutting Diamond Cutter remains the same, when should a new one be purchased? If you should wait until the end of its life then enter 20. Otherwise enter the year when a new one should be bought.

1. If you invest $1,000 today at an interest rate of 10% per year, how much will you have 20 years from now, assuming no withdrawals in the interim?
2. What is the present value of the following cash flows at an interest rate of 10% per year?
   1. $100 received five years from now.
   2. $100 received 60 years from now.
   3. $100 received each year beginning one year from now and ending 10 years from now.
   4. $100 received each year for 10 years beginning now.
   5. $100 each year beginning one year from now and continuing forever. (Hint: You do not need to use the financial keys of your calculator for this, just some common sense.)