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grin007 [14]
3 years ago
9

Kansas Enterprises purchased equipment for $73,500 on January 1, 2021. The equipment is expected to have a five-year service lif

e, with a residual value of $6,450 at the end of five years. Using the double-declining balance method, depreciation expense for 2022 would be
Business
1 answer:
saveliy_v [14]3 years ago
3 0

Answer:

The answer is $17,640

Explanation:

Equipment was bought on Jan. 1, 2022 for $73,500. This is the historical cost of the asset.

Residual value is $6,450. This is the amount the equipment is being expected to sell for at the end of its useful life.

Useful life is 5 years.

To know the percentage to be used for the depreciation, we have:

100percent / 5 years

= 20 percent

Double-declining is 40 percent(20 percent x 2)

Depreciation for 2021 is

$73,500 x 40 percent

= $29,400.

Carrying amount at the end of 2021 which will also be for the beginning of 2022 is $44,100 ($73,500 - $29,400)

Depreciation for 2022:

$44,100 x 40 percent

$17,640.

Therefore, the depreciation for 2022 is $17,640.

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3 years ago
Fred Flintlock wants to earn a total of 10% on his investments. He recently purchased shares of ABC stock at a price of $20 a sh
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Answer:

Option (C) is correct.

Explanation:

Return on the stock = (Dividend ÷ Investment) + (capital gain ÷ investment )

= (Dividend ÷ Investment) + (Final price of the stock - initial price of the stock) ÷ Investment

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10 = 5 + 5 × ( final price - 20)

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Lindsey Hunter Corporation is authorized to issue 50,000 shares of $5 par value common stock. During 2020, Lindsey Hunter took p
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Answer:

Lindsey Hunter Corporation:

a) Journal entry to record item 1:

Debit Cash Account with $225,000

Credit Common Stock with 25,000

Credit APIC Account with $200,000

To record the issue of 5,000 shares of $5 par value at $45 per share

b) Journal entry to record item 2:

Debit Land Account with $50,000

Credit Common Stock with $5,000

Credit APIC Account with $45,000

To record the issue of 1,000 shares $5 par value at $50 per share.

c) Journal entry to record item 3:

Debit Treasury Stock with $21,500

Credit Cash with $21,500

To record the purchase of 500 treasury shares at $43 per share, using the cost method.

Explanation:

a) The costs related to the issuance of the stock totaling $7,000 had been deducted before arriving at $45 issue price.  These costs include attorney, accountants, and underwriting fees.  Companies have two options to treat these costs.  One is to treat them as organization costs and expense them accordingly or apply the costs to reduce the paid-in capital.  The later is the method elected by Lindsey Hunter and it is alright.

b) Company stock can be issued for cash or other assets, as in question 2.  The treatment is similar.  This time, Land is increased instead of cash.  The most important issue is the price at which the land is appraised and not the market value of the stock.  The difference between par value and issue value is credited or debited to the APIC account.

c) The APIC account represents "Additional Paid-in Capital" also described as Share Premium Account.  It is the excess of the issue value over the par value.

d) Treasury stock is company stock that was formerly outstanding and now bought back from stockholders.  It is a reduction of the Equity.  It is created as a contra account.  There are two methods of treating treasury stock.

One method accounts for treasury stock at cost while the second method accounts for it at par.  The difference is that when it is accounted for at cost, the repurchase value is debited to the Treasury account while the credit entry goes to the Cash account.

On the other hand, when it is accounted for at par, the par value is debited to the Treasury account while the difference between par and repurchase value is debited or credited to the APIC account.  The credit entry goes to the Cash account, as always.

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