1. Covey Company purchased a machine on January 2, 2008, by paying cash of $350,000. The machine has an estimated useful life of five years (or the production of 600,000 units) and an estimated residual value of $35,000.
Required:
- Determine depreciation expense (to the nearest dollar) for each year of the machine’s useful life under (a). straight-line depreciation; and (b). the declining balance method with a 200% acceleration rate.
- What is the book value of the machine after three years with the declining- balance method and a 200% acceleration rate?
- What is the book value of the machinery after three years with straight-line depreciation?
4. If the machine was used to produce and sell 130,000 units in 2008, what would the depreciation expense be under the units of production method?
2. Moore Company has the following partial list of account balances at year end:
Accounts payable |
$ 1,800 |
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Accounts receivable |
1,600 |
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Bonds payable (due in 5 years) |
80,000 |
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Cash |
4,000 |
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Equipment (net) |
10,000 |
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Land |
25,000 |
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Notes payable (due in 6 months) |
1,200 |
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Salaries payable |
800 |
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Cost of Goods Sold |
3,200 |
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Required: |
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A. | Compute the current ratio. | ||
B. | Determine the amount of working capital. | ||
C. | Assume that cash is used to pay the balance due on accounts payable.
1. Compute the new current ratio. 2. Compute the new amount of working capital. |
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D. | Compute the payable turnover (round to one decimal). |
3. Border Company purchased a truck that cost $18,000. The company signed a $18,000 note payable that specified four equal annual payments (at each year-end), each of which includes a payment on the principal and interest on the unpaid balance at 10% per annum.
Required:
A. | Compute the amount of each equal payment (round to the nearest dollar). |
B. | Give the entry to record the purchase of the truck. |
C. | Give the entry to record the first annual payment on the note. |
D. | Will the interest paid with the first annual payment be more or less than the interest paid with the second annual payment? Explain your answer. |