Disposal of Fixed Asset

Equipment acquired on January 6 at a cost of $234,600, has an estimated useful life of 10 years and an estimated residual value of $30,600.

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

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 $164,700, 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 $176,900 instead of $164,700, journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.

Previous

Next

On March 31, Year 1, Big Ltd. purchased 1,500 (15% ownership) of the shares of Small Ltd. at a price of $10 per share. On December 31, Year 1, Big’s year-end date, Small paid a dividend of $0.50 per share and reported net income for the year of $25,000, which was earned evenly over the year. On December 31, Year 1, the Small shares had a fair value of $14 per share. Required: Provide all journal entries to be made by Big on March 31 and December 31, Year 1, assuming the investment in Small was to be accounted for using the: a. Equity method b. Fair value through net income model c. Fair value through other comprehensive income model

A machine costing $207,200 with a four-year life and an estimated $16,000 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: 123,400 in 1st year, 124,200 in 2nd year, 120,900 in 3rd year, 119,500 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.)

Sandra, a single taxpayer with a marginal tax rate of 35 percent, sold the following assets during the year:

*$30,000 of the gain is §1250 recapture. The remaining gain is 0/15/20 percent gain. What are Sandra’s recognized gains/losses for the year and what tax rate(s) will apply to those gains/losses?

The Femaware Company uses the allowance method to account for bad debts. At the beginning of year 1, the allowance account had a credit balance of $66,844. Credit sales for year 1 totaled $2,139,000 and the year end accounts receivable balance was $436,713. During this year, $65,061 in receivables were determined to be uncollectible. Femaware anticipates that 4% of all credit sales will ultimately become uncollectible. The fiscal year ends on December 31.

Required:

1. Does this situation describe a loss contingency? Explain.

2. What is the bad debt expense that Femaware should report in its year 1 income statement?

3. Prepare the appropriate journal entry to record the contingency.

4. What is the net realizable value (book value) Femaware should report in its year 1 balance sheet?

Shoe-production equipment is purchased on January 1, 2020. The relevant data is as follows:

Equipment Cost $10,000

Estimated residual value -1,560

Accounting periods 5 years

Shoe-production equipment is purchased on January 1, 2020. The relevant data is as follows:

Equipment Cost $10,000

Estimated residual value -1,560

Accounting periods 5 years

Units produced 38,000 shoes

first year units produced are : 7000 CAD

first year units produced are : 5000 CAD

first year units produced are : 7000 CAD

first year units produced are : 6600 CAD

first year units produced are : 3000 CAD

1- Calculate the first year depreciation using the three methods usable

2- Calculate the accumulated depreciation using the three methods for the 3rd and 4th year.

Assume that the net cash flow of a potential $7.25 million investment is $1.1 million in year 1, then $1.25 million in year 2, $1.4 million in year 3, $2.2 million in year 4 and year 5, and then sold at the end of year 5 for $850,000. Further assume that in each year cash flows (excluding initial investment) could be as much as $400,000 less than forecast, or $400,000 more than forecast. Suppose you assess the “low net cash flow” probability at 25 percent likely, the base (original) scenario at 50 percent likely, and the “high net cash flow” probability at 25 percent. The corporate cost of capital is 9 percent.

1. What is the worst case MIRR? ____%

- What is the best case MIRR? ____%

30-year maturity bond has a 5.3% coupon rate, paid annually. It sells today for $884.92. A 20-year maturity bond has a 4.8% coupon rate, also paid annually. It sells today for $890.5. A bond market analyst forecasts that in five years, 25-year maturity bonds will sell at yields to maturity of 6.3% and 15-year maturity bonds will sell at yields of 5.8%. Because the yield curve is upward sloping, the analyst believes that coupons will be invested in short-term securities at a rate of 4.3%.

a. Calculate the (annualized) expected rate of return of the 30-year bond over the 5-year period. (Round your answer to 2 decimal places.)

b. What is the (annualized) expected return of the 20-year bond? (Round your answer to 2 decimal places.)

A self-employed worker operates a firewood-splitting service. He purchased a commercial-grade wood splitter for $5800. He used $400 of business capital and financed the balance at 5% per year for 3 years. The estimated values of the splitter for the next 6 years are $2200 after the first year of ownership, decreasing by $400 per year to year 5, after which the resale value remains at $600. Annual operating costs are expected to be $1000 the first year, increasing by 10% each year thereafter. He considers keeping the splitter at least 6 years. If money is worth 7% per year, for how many years should the splitter be retained? (Perform the Economic Minimum Life analysis for at least 12 years.) Spreadsheet solution required with a summary of what is being analyzed.

Tao Wang is considering leasing space for five years for his Chinese Buffet food establishment. He has three lease options as follows: 1. Fixed lease options: Pay $5,000 per month for sixty months beginning on the first day of the five-year lease. Pay $55,000 per year on the first day of each year for five years. 2. Mixed lease option: Pay $25,000 on the first day of each year and 3 percent of annual sales on the last day of each year for five years. The forecasted annual sales are $1,400,000 for the first year, and sales are expected to increase by 5 percent each year. Assume Tao’s cost of capital is 10 percent. Determine the annual cash rents under each option.