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Dmitry [639]
3 years ago
10

On January 2, Year 1, Jones Corporation purchased a truck for $39,000. The truck has a 5-year estimated life and a $4,000 estima

ted salvage value. Jones expects to drive the truck 100,000 miles during its useful life. Prepare the depreciation schedule for Year 1 through Year 5 using each of the following depreciation methods; Straight-line method, 200 declining balance method, and Sum-of-years-digits method. You have to construct the depreciation schedules to answer this question. Make sure that all of your calculations should be done on the excel formula bar to show how you obtained your answers.
Business
1 answer:
In-s [12.5K]3 years ago
8 0

Answer:

Straight-line method:

  • depreciation expense year 1 = ($39,000 - $4,000) / 5 = $7,000
  • depreciation expense year 2 = $7,000
  • depreciation expense year 3 = $7,000
  • depreciation expense year 4 = $7,000
  • depreciation expense year 5 = $7,000

200 declining balance method:

  • depreciation expense year 1 = 2 x 1/5 x $39,000 = $15,600
  • depreciation expense year 2 = 2 x 1/5 x $23,400 = $9,360
  • depreciation expense year 3 = 2 x 1/5 x $14,040 = $5,616
  • depreciation expense year 4 = 2 x 1/5 x $8,424 = $3,369.60
  • depreciation expense year 5 = $5,054.40 - $4,000 = $1,054.40

Sum-of-years-digits method:

  • depreciation expense year 1 = 5/15 x $35,000 = $11,666.67
  • depreciation expense year 2 = 4/15 x $35,000 = $9,333.33
  • depreciation expense year 3 = 3/15 x $35,000 = $7,000
  • depreciation expense year 4 = 2/15 x $35,000 = $4,666.67
  • depreciation expense year 5 = 1/15 x $35,000 = $2,333.33
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Suppose your company needs $13 million to build a new assembly line. Your target debt-equity ratio is .55. The flotation cost fo
natulia [17]

Answer:<em>True cost = \frac{cost of assembly}{1-weighted flotation cost }</em>

<em>=  \frac{13,000,000}{1- 0.049}</em>

<em>= $ 13,669,821.2</em>

Explanation:

Given :

Debt-Equity ratio = 0.55

Flotation cost for new equity = 6%

Flotation cost for debt = 3 %

∴ To compute the weighted flotation cost , we'll use the following formula:

Weighted Flotation cost =\left [ \frac{1}{1+Debt-Equity ratio}\times Flotation cost of equity \right ] + \left [ \frac{Debt-Equity ratio}{1+Debt-Equity ratio}\times Flotation cost of debt \right ]

=  \left [ \frac{1}{1+0.55}\times 0.06 \right ] + \left [ \frac{0.55}{1+0.55}\times 0.03 \right ]

= 0.0387 + 0.0106

= 0.04934 or 4.93%

The true cost of building the new assembly line after taking flotation costs into account is evaluated using the following formula :

True cost = \frac{cost of assembly}{1-weighted flotation cost }

=  \frac{13,000,000}{1- 0.049}

= $ 13,669,821.2

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