Crispy Fried Chicken bought equipment on January 2, 2016, for $ 18 comma 000. The equipment was expected to remain in service for four years and to perform 3 comma 000 fry jobs. At the end of the equipment's useful life, Crispy estimates that its residual value will be $ 3 comma 000. The equipment performed 300 jobs the first year, 900 the second year, 1 comma 200 the third year, and 600 the fourth year. Requirements 1. Prepare a schedule of depreciation expense, accumulated depreciation, and book value per year for the equipment under the three depreciation methods. Show your computations. Note: Three depreciation schedules must be prepared. 2. Which method tracks the wear and tear on the equipment most closely?
Answers
Answer:
Please check the attached image for the depreciation schedule
2. Units of production method
Explanation:
Book value in year 1 = Cost of asset - Depreciation expense of year 1
Book value in year in subsequent years = previous book value - that year's depreciation expense
Accumulated depreciation is sum of deprecation expense
Straight line depreciation expense = (Cost of asset - Salvage value) / useful life
($18,000 - $3,000) / 4 = $3,750
Depreciation expense each year of the useful life is $3,750
Depreciation expense using the double declining method = Depreciation factor x cost of the asset
Deprecation factor = 2 x (1/useful life) = 0.5
Depreciation expense in year 1 = 0.5 x $18,000 = $9,000
Book value = $18,000 - $9,000 = $9,000
Depreciation expense in year 2 = 0.5 × $9,000 = $4,500
Book value = $9,000 - $4,500 = $4,500
Depreciation expense in year 3 = 0.5 x $4,500 = $2250
Book value = $4,500 - $2250 = $2250
Depreciation expense in year 4 = 0.5 × $2250 = $1125
Depreciation expense using the unit of production method =( Total production in the year/ total productive capacity) × (cost of asset - Salvage value)
Depreciation expense in year 1 = ($18,000 - $3,000) x (300 / 3000) = $1,500
Depreciation expense in year 2 =18,000 - $3,000) x (900 / 3000) = $4,500
Depreciation expense in year 3 = (18,000 - $3,000) x (1200 / 3000) = $6,000
Depreciation expense in year 3 = (18,000 - $3,000) x (600 / 3000) = $3,000
The Units of production method tracks wear and tear accurately because deprecation depends on the production each year.
I hope my answer helps you
Related Questions
Janet and James purchased their personal residence 15 years ago for $300,000. For the current year, they have an $80,000 first mortgage on their home, on which they paid $5,750 in interest. They also have a home equity loan to pay for the children’s college tuition secured by their home with a balance throughout the year of $150,000. They paid interest on the home equity loan of $9,000 for the year. Calculate the amount of their deduction for interest paid on qualified residence acquisition debt and qualified home equity debt for the current year. If your answer is zero, enter "0".a. Qualified residence acquisition debt interest $b. Qualified home equity debt interest $
Answers
Answer:
a. Qualified residence acquisition debt interest
$5,750b. Qualified home equity debt interest
$0Explanation:
Qualified residence interest deduction includes all interests on debt related to building, acquiring or improving your primary residence.
Before 2018, any interests on home equity loans were deductible, but not anymore. Only those interests on equity loans used to improve your existing home (build or remodel) qualify as deductible home equity debt interest. If the debt was taken before 2018, you can still deduct the interests even if it was used for paying college tuition, but since we are not given any dates here, we must assume it was a new debt.
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $87,900 for the firm during the first year, and the cash flows are projected to grow at a rate of 5 percent per year forever. The project requires an initial investment of $1,400,000.
What is the NPV for the project if Yurdone's required return is 10 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
If Yurdone requires a return of 10 percent on such undertakings, should the firm accept or reject the project?
The company is somewhat unsure about the assumption of a 5 percent growth rate in its cash flows. At what constant growth rate would the company just break even if it still required a return of 10 percent on investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Answers
Answer:
What is the NPV for the project if Yurdone's required return is 10 percent?
$358,000If Yurdone requires a return of 10 percent on such undertakings, should the firm accept or reject the project?
Yes, because the project's NPV is positive, which means that its IRR is higher than the required rate of return.At what constant growth rate would the company just break even if it still required a return of 10 percent on investment?
3.72%Explanation:
initial investment = $1,400,000
net cash inflow₁ = $87,900
perpetual growth rate = 5%
required rate of return = 10%
project's current intrinsic value = $87,900 / (10% - 5%) = $1,758,000
project's NPV = $1,758,000 - $1,400,000 = $358,000
$1,400,000 = $87,900 / (10% - g)
$1,400,000(10% - g) = $87,900
$140,000 - $1,400,000g = $87,900
$140,000 - $87,900 = $1,400,000g
$52,100 = $1,400,000g
g = $52,100 / $1,400,000 = 3.72%
Balance sheet and income statement data indicate the following: Bonds payable, 10% (due in two years) $826,000 Preferred 5% stock, $100 par (no change during year) 277,000 Common stock, $50 par (no change during year) 1,530,000 Income before income tax for year 342,000 Income tax for year 79,000 Common dividends paid 76,500 Preferred dividends paid 13,850 Based on the data presented, what is the times interest earned ratio (rounded to one decimal place)
Answers
Answer:
5.1
Explanation:
Times interest earned ratio can be described as the ability of an organisation to make their debt payment within the stipulated period of time
The formular for calculating Times interest earned ratio is
= Earnings before interest and tax/Total interest payable
The interest exsense can be calculated as follows
Interest expense= $826,000×10/100
= $82,600
Since the income generated before income tax is $342,000
The time interest earned ratio is calculated as follows
= $342,000+ $82,600/$82,600
= $424,600/$82,600
= 5.14
= 5.1 ( rounded to 1 decimal place)
Hence the Times interest earned ratio is 5.1
Illinois Company uses the periodic inventory system. Beginning and ending inventories for 2019 were $280,000 and $240,000, respectively. Net purchases were $720,000 while freight in was $60,000. The cost of good sold net income for 2019 was:
Answers
Answer:
Cost of goods sold = $820,000
Explanation:
Cost of goods sold represent the amount incurred as direct expenditures on the goods sold. It is measured in cost and cal calculated as follows:
Cost of goods sold = opening inventory + purchases+ freight charges - closing inventory
= 280,000 + 720,000 + 60,000 - 240,000 = 820,000
Cost of goods sold = $820,000
Which of the following is not a business transaction? Question 6 options: Erin deposits $15,000 in a bank account in the name of Erin’s Lawn Service. Erin provided services to customers earning fees of $600. Erin purchased hedge trimmers for her lawn service agreeing to pay the supplier next month. Erin pays her monthly personal credit card bill.
Answers
Answer:
Erin purchased hedge trimmers for her lawn service agreeing to pay the supplier next month.
Explanation:
Tristan Narvaja, S.A. (C). Tristan Narvaja, S.A., is the Uruguayan subsidiary of a U.S. manufacturing company. Its balance sheet for January 1 is shown in the popup window, B. The January 1 exchange rate between the U.S. dollar and the peso Uruguayo ($U) is $U22/$. A. Determine Tristan Narvaja's contribution to the translation exposure of its parent on January 1, using the current rate method. B. Calculate Tristan Narvaja's contribution to its parent's translation gain or loss if the exchange rate on December 31st is $U15/$. Assume all peso Uruguayo accounts remain as they were at the beginning of the year. Balance Sheet (thousands of pesos Uruguayo, $U) Assets Liabilities and Net Worth Cash $U60,000 Current liabilities $U30,000 Accounts receivable 110,000 Long-term debt 50,000 Inventory 150,000 Capital stock 270,000 Net plant & equipment 240,000 Retained earnings 210,000 $U560,000 $U560,000
Answers
Answer:
Kindly check attached picture
Explanation:
Kindly check attached picture for detailed explanation
What are tax credits?
Your adjustments, deductions, and exemptions reduce your taxable income. Tax credits, on the other hand, are directly applied to the tax that you pay. You may take tax credits regardless of whether you itemize deductions. Many credits are limited, based on income levels, so the amount of a credit may be reduced for high-income taxpayers.
The following statement refers to refundable or nonrefundable tax credits. A tax credit that reduces your income tax liability to below zero with the excess being returned to you is___________ .
Answers
Answer: Refundable Tax Credit
Explanation:
When a tax credit is able to reduce your tax liability to below zero and then the remainder is returned to you, that is a Refundable Tax Credit. For Instance, if you get a Refundable tax credit from the IRS of $300 and your Tax Liability is $250 then not only do you not have to pay the liability but the IRS will give you $50 which is the remainder after the tax credit reduced the liability to $0.
If you have $0 in Liability, you can still apply for a Refundable Tax Credit which means that you will be paid the whole thing.
Some people therefore first calculate their taxes and then remove the deductions and apply for Non-refundable tax credits and then when their liability is at the lowest, they apply for a Refundable Tax Credit which then means that they can stand a chance to get something from the IRS.
A preferred stock will pay a dividend of $1.25 in the upcoming year and every year thereafter; i.e., dividends are not expected to grow. You require a return of 12% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock. Multiple Choice $11.82 $10.42 $11.56 $9.65
Answers
Answer:
$10.42
Explanation:
The computation of the intrinsic value of this preferred stock using the DDM method is shown below:
= Annual dividend ÷ required rate of return
where,
The Annual dividend is $1.25
And, the required rate of return is 12%
Now placing these values to the above formula,
So, the intrinsic value of the preferred stock is
= $1.25 ÷ 0.12
= $10.42
Hence, the second option is correct
