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Vlad1618 [11]
3 years ago
5

An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it h

as an estimated market value of $12,000 at the end of an estimated useful life of 14 years. Compute the depreciation amount in the third year and book value at the end of the fifth year of life using SL method and 200% DB method with switchover to SL. Which method should the company use
Business
1 answer:
Vladimir [108]3 years ago
3 0

Answer:

purchase price $60,000

estimated useful life 14 years

residual value $12,000

depreciation expense using straight line method:

using straight line = ($60,000 - $12,000) / 14 = $3,428.57

depreciation during year 3 = $3,428.57

book value at end of year 5 = $60,000 - ($3,428.57 x 5) = $42,857.15

depreciation expense using SL method and 200% DB method with switchover to SL:

year 1 = $60,000 x 2 x 1/14 = $8,571.43

year 2 = $51,428.57 x 2 x 1/14 = $7,346.94

year 3 = $44,081.63 x 2 x 1/14 = $6,297.38

year 4 = $37,784.25 x 2 x 1/14 = $5,397.75

year 5 = $32,386.50 x 2 x 1/14 = $4,626.64

book value at end of year 5 = $27,759.86

Since the depreciation expense using double balance with switchover to straight line is higher during the first years, then the company should use that method. One extra dollar in depreciation expense = one less dollar in taxable income. It is usually better pay less taxes today than tomorrow.

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Boone Products had the following unit costs:Direct materials $24Direct labor 10Variable overhead 8Fixed factory (allocated) 18A
Maslowich

Answer: Option (b) is correct.

Explanation:

Given that,

Direct materials = $24

Direct labor = $10

Variable overhead = $8

Fixed factory (allocated) = $18

Overtime premium = $8 per unit

Purchased = 2,000 units at a special price of $48 per unit

Contribution Margin (2000 - 1000 units) = special price per unit - Direct materials - Direct labor - Variable overhead

= 48 - 24 - 10 - 8

= $6 per unit

Contribution margin for units produced during overtime = special price per unit - Direct materials - Direct labor - Variable overhead - Overtime premium

= 48 - 24 - 10 - 8 - 7

= $(-1) per unit

Total contribution = 1000 × 6 + 1000 × -1

= $6000 - $1000

= $4000 Profit

Therefore, additional profit will be generated by accepting the special order is $4000.

4 0
3 years ago
What may happen if your job does not require you to use the aptitudes you possess?​
Viktor [21]

Answer:

<u>they will be underused and learning new interests may become necessary.</u>

<u>Explanation:</u>

Aptitudes usually refer to a person's inborn abilities or talents which include their mental and physical skills.

For example, If Mr. John knows how to sing but finds himself working as an IT specialist for a Security company, there is a high tendency that he will underuse his singing abilities and be more interested in learning IT skills than if he was working for a Radio station.

8 0
3 years ago
Assume that Plavor Brands, Inc. has 10,000,000 common shares outstanding that have a par value of $2 per share. The stock is cur
Kay [80]

Answer:

The multiple choices:

Earnings per share will remain the same since a stock dividend does not create an expense.

Earnings per share will increase because the dividend increases the value of the company.

Earnings per share will decrease because the number of shares outstanding will go up.

The impact cannot be determined without additional information on the new price per share.

The correct option is earnings per share will decrease because the number of shares outstanding will go up.

Explanation:

Initial EPS=earnings attributable to common stock/average weighted number of common stock

earnings attributable to common stock is $25,000,000

average weighted number of common stock is 10,000,000

Initial EPS=$25,000,000/10,000,000

                 =$2.5

EPS with 10% stock dividend :

average weighted number of common stock=10,000,000*(1+10%)

average weighted number of common stock=10,000,000*(1+0.1)

average weighted number of common stock=11,00,000

EPS with 10% stock dividend=$25,000,000/11,000,000

                                                  =$2.27

EPS reduced from $2.5 to $2.27 due to 10% stock dividend as there are more shares than  previously.

8 0
3 years ago
Long-term debt outstanding: $300,000 Current yield to maturity (rdebt): 8% Number of shares of common stock: 10,000 Price per sh
nadya68 [22]

Answer:

Cost of capital=11.18%

Explanation:

First We will calculate the Equity of firm:

Equity= Number of share* Book value per share

Equity= 10,000* $25

Equity= $250,000

Long-term debt=$300,000

Expected rate of return=15%=0.15

Current yield to maturity (rdebt)=8%=0.08.

Value of firm=Equity+Long-term debt

Value of firm= $250,000+$300,000

Value of firm= $550,000

Formula:

Cost\ of \ Capital=\frac{Equity}{Value\ of\ firm}* Rate\ of\ return+\frac{Debit}{Value\ of\ firm}* yield\ to\ maturity

Cost\ of\ Capital=\frac{\$250,000}{\$550,000}*0.15+\frac{\$300,000}{\$550,000}*0.08\\  Cost\ of\ Capital=0.1118

Cost of capital=11.18%

6 0
3 years ago
Alfredo manufactures high-quality tennis shoes for specific sports. He has a large storage facility at the manufacturing plant b
AleksandrR [38]

Answer:

d. Change to a just-in-time inventory system and make the shoes as they are ordered rather than making and storing many shoes and hoping to sell them.

Explanation:

In the Just-in-time inventory management system, materials purchased go straight to the production line. The business keeps minimum or nil raw material in its stores. Demand for goods guides the production process.

Should Alfredo manufactures adopt a Just in time production style, its inventory budgetary requirement will significantly reduce. Alfredo will be ordering for material need for production at that moment. The company will be manufacturing shoes that customers are ready to buy. Its cost of finished inventory will also decrease.

For Just-in-time system  to work well at Alfredo, managers must learn how to predict demand accurately and employ an excellent order management system

6 0
3 years ago
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