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Inessa [10]
3 years ago
9

Use the following method to calculate the yearly depreciation allowances and book values for a firm that has purchased $150,000

worth of office equipment that qualifies as depreciation property. The equipment is estimated to have a salvage (market) value of $30,000 (20% of the original cost) after the end of its 10-year depreciable life.
a. Straight line
b. MACRS
c. Sum-of-Years' Digits
Business
1 answer:
Dafna1 [17]3 years ago
3 0

Answer:

a. Straight Line Method Depreciation= $ 2400

b. MACRS

c. Sum-of-Years' Digits

Explanation:

a. Straight Line Method Depreciation=

Purchase Cost- Salvage Value/ No of useful life *depreciation rate

=$ 150,000- $30,000/10 * 20%

=120,000/10* 20%= 12000* 20/100=$ 2400

b. MACRS

Since it is a non-form 10-year property, the company can elect to use either the 150% or 200% declining balance method.

Depreciation in 1st Year = Cost × 1/Useful Life × A × Depreciation Convention

Depreciation in Subsequent Years =

(Cost − Depreciation in Previous Years) × 1/ Recovery Period × A

Where,

A is 100% or 150% or 200%.

Depreciation for the the first year $ 150,000/10 *200%= $30,000

Depreciation for the the 2nd year =$ 150,000-30,000/10 *200%= $24,000

Depreciation for the the third year =$ 150,000-30,000- 24000/10 *200%

=$ 19,200

Depreciation for the the 4th year $ 150,000-30,000-24000-19200/10 *200%=  Note A

Note A: MACRS declining balance changes to straight-line method when that method provides an equal or greater deduction. Deduction under 200% declining balance MACRS for 4th year  would be $ 153,600 ($150000 - $30,000 - $24000 - $19200  × 1/10 × 200%. This is greater than depreciation under straight line method .

c. Sum-of-Years' Digits Method Depreciation

Depreciation Amount = Acquisition Cost - Salvage Value = $ 120,000

Sum of useful life= 10+9+8+7+6+5+4+3+2+1= 55

Depreciation Factor = 10/55, 9/55, 8/55, 7/55 etc.

Depreciation for the 1st year= 10/55* 120,000= $ 21,818.2

Depreciation for the 2nd year= 9/55* 120,000= $ 19 636.4

Depreciation for the 3rd year= 8/55* 120,000=  $17,546

Depreciation for the 4th year= 7/55* 120,000=  $ 15,273

Depreciation for the 5th year= 6/55* 120,000= $ 13,091

Depreciation for the 6th year= 5/55* 120,000= $ 10,909.1

Depreciation for the 7th year= 4/55* 120,000= $ 8727.3

Depreciation for the 8th year= 3/55* 120,000=  $ 6545.5

Depreciation for the 9th year= 2/55* 120,000=  $4363.63

Depreciation for the 10th year= 1/55* 120,000= $ 2181.81

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The following trial balance was taken from the books of Sheridan Corporation on December 31, 2020.
Leokris [45]

Answer:

Sheridan Corporation

a. Adjusting Journal Entries on December 31, 2020:

a. Debit Insurance Expense $2,000

Credit Prepaid Insurance $2,000

To record the insurance expense for the year.

b. Debit Bad Debts Expense $2,680

Credit Accounts Receivable $2,680

To record bad debts written off.

c. Debit Depreciation Expense - Equipment $12,260

Credit Accumulated Depreciation - Equipment $12,260

To record the depreciation expense for the year.

d. Debit Interest Receivable $672

Credit Interest Revenue $672

To record interest revenue receivable on the note.

e. Debit Rent Prepaid $5,400

Credit Rent Expense $5,400

To record rent prepaid, previously recorded as an expense.

f. Debit Salaries and Wages Expense $5,800

Credit Salaries Payable $5,800

To record accrued salaries.

b. Closing Journal Entries on December 31, 2020:

Debit Sales Revenue $268,000

Interest Revenue $672

Credit Income Summary $268,672

To close the revenue accounts to the income summary.

Debit Income Summary $202,040

Credit:

Cost of Goods Sold                 123,900

Salaries and Wages Expense  54,400

Rent Expense                             6,800

Bad debts Expense                   2,680

Insurance Expense                   2,000

Depreciation Expense             12,260

To close the expense accounts to the income summary.

Explanation:

a) Data and Calculations:

Sheridan Corporation

Unadjusted Trial Balance as of December 31, 2020:

Account Titles                               Debit     Credit

Cash                                             $8,500

Accounts Receivable                   40,700

Notes Receivable                          11,200

Allowance for Doubtful Accounts               $1,870

Inventory                                     35,300

Prepaid Insurance                         4,720

Equipment                                 122,600

Accumulated Depreciation--Equip.             14,100

Accounts Payable                                        10,100

Common Stock                                           49,100

Retained Earnings                                     64,550

Sales Revenue                                        268,000

Cost of Goods Sold                 123,900

Salaries and Wages Expense  48,600

Rent Expense                           12,200

Totals                                   $407,720 $407,720

Adjustments:

a. Insurance Expense $2,000 Prepaid Insurance $2,000

b. Bad Debts Expense $2,680 Accounts Receivable $2,680 (1% of $268,000)

c. Depreciation Expense - Equipment $12,260 Accumulated Depreciation - Equipment $12,260 (10% of $122,600)

d. Interest Receivable $672 Interest Revenue $672 (6% of $11,200)

e. Rent Prepaid $5,400 Rent Expense $5,400

f. Salaries and Wages Expense $5,800 Salaries Payable $5,800

Sheridan Corporation

Adjusted Trial Balance as of December 31, 2020:

Account Titles                               Debit     Credit

Cash                                             $8,500

Accounts Receivable                   38,020

Notes Receivable                          11,200

Interest Receivable                           672

Allowance for Doubtful Accounts               $1,870

Inventory                                     35,300

Prepaid Insurance                         2,720

Prepaid Rent                                 5,400

Equipment                                 122,600

Accumulated Depreciation--Equip.           26,360

Accounts Payable                                        10,100

Salaries Payable                                           5,800

Common Stock                                           49,100

Retained Earnings                                     64,550

Sales Revenue                                        268,000

Interest Revenue                                            672

Cost of Goods Sold                 123,900

Salaries and Wages Expense  54,400

Rent Expense                             6,800

Bad debts Expense                   2,680

Insurance Expense                   2,000

Depreciation Expense            12,260

Totals                                   $426,452 $426,452

8 0
3 years ago
Steady Company’s stock has a beta of 0.20. If the risk-free rate is 6% and the market risk premium is 7%, what is an estimate of
777dan777 [17]

Answer:

the estimation of the cost of equity is 7.4%

Explanation:

The computation of the estimation of the cost of equity is shown below:

Here we used the Capital Asset Pricing model formula i.e.

Cost of equity = Risk free rate + Beta × market risk premium

= 6% + 0.20 × 7%

= 6% + 1.4%

= 7.4%

Hence, the estimation of the cost of equity is 7.4%

We simply applied the above formula so that the correct value could come

And, the same is to be considered  

5 0
2 years ago
Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respec
Oksana_A [137]

Answer:

$250,000

Explanation:

Calculation for the cash flows from operating activities to be reported on the Statement of Cash Flows

Using this formula

Cash flows=Income Statement+(Accounts receivable arising from sales)

Let plug in the formula

Cash flows=$240,000 +($80,000-$70,000)

Cash flows=$240,000 +$10,000

Cash flows=$250,000

Therefore the cash flows from operating activities to be reported on the Statement of Cash Flows is $250,000

6 0
3 years ago
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