Answer:
a. Particulars Amount
Patent cost $400,000
Less: Amortization for 3 years <u>$150,000 </u> ($400,000*3/8)
Book value at the end of year 3 $250,000
Addition during Year 4 <u>$20,000 </u>
Total book value <u>$270,000</u>
Patent amortization expense for the Year 4 = Total book value / Remaining life
Patent amortization expense for the Year 4 = $270,000 / 5
Patent amortization expense for the Year 4 = $54,000
b. Adjusting Entry
Date Account titles Debit Credit
Amortization expense $54,000
Patents $54,000
Answer:
Future value at the end of 19 years =$63,637.94
Explanation:
<em>The Future value (FV) of an investment is the total amount (principal plus interest) that will accumulate in the future where interest is paid and compounded at a particular rate per period for a certain number of periods.</em>
This can be done using the formula below
FV = PV × (1+r)^(n)
FV- Future Value
PV- amount invested, n- number of years, r - interest rate
The amount due after 19 years would be determined in two steps
Step 1: FV of 24,500 at 5.5% for 8 years
FV = 24,500× (1+0.055)^8 =37,599.819
Step 2 : FV of 37599.81962 invested for 11 years at 4.9% p.a
FV = ? P=37,599.81, n- 11, r- 4.9%
FV = 37,599.81 × (1.049)^11= 63,637.94
Future value at the end of 19 years =$63,637.94
Answer:
A Loss of $10,000
Explanation:
To calculate the depreciation using the straight line method.
Depreciation = Cost - Salvage value/ no. of years
$50,000 - $10,000/ 4 = $10,000
Annual depreciation now is: $10,000
Net book Value (NBV) for the year of disposal i.e 2018 will be:
Cost - Accumulated Depreciation = NBV
$50,000 - $30,000 = $20,000
NBV is $20,000
but was sold for $10,000 which is a loss of $10,000
Answer:
Accounting entity concept:
The basic idea behind this concept is that business and the owner are two different entities. Their transactions are to be recorded separately.
Going concern concept:
The concept is to have a view that the company is going to stay solvent in the future. That is we will have another accounting year in the future unless and otherwise we have evidence to the contrary.
Cost-benefit constraint:
It limits the amount of time to research the cost of an event if its benefits outweighs. In case of an immaterial event if its cost outweighs the benefits then that event can be forgone.
Expense recognition (matching principle):
The matching principle states that all the expenses are to be recorded based on the year they have been incurred rather than on the time they are paid.
Materiality constraint:
It states that any event that changes or effects the decision making of the user of financial statement should be recorded and vice versa.
Revenue recognition principle:
It states that the revenue is to be recorded in the period in which it has been incurred instead when it is collected. Accrual basis gives a more clear picture of the performance of the company.
Full disclosure principle:
It requires to disclose any information to be mentioned in the foot notes of the financial statements of the company that might affect the user of financial statement. This helps in identifying the methods used for accounting practices and any event that might effect the organisations future existence.
Cost principle:
To record the transactions based on their historical costs rather than making adjustments for fluctuations in market place.
Answer:
1. Factory supervisory salaries <u><em>Production Cost</em></u> Factory Overhead
2. Sales commissions Period Cost Selling expense
3. Income tax expense Period Cost tax expense
4. Indirect materials used <u><em>Production Cost</em></u> Factory Overhead
5. Indirect labor <u><em>Production Cost </em></u>Factory Overhead
6. Office salaries expense Period Cost Administrative expense
7. Property taxes on factory building <em><u>Production Cost</u></em><em> </em>Factory Overhead
8. Sales manager's salary Period Cost Selling expense
9. Factory wages expense <em><u>Production Cost </u></em>Direct Labor
10. Direct materials used <em><u>Production Cost</u></em> Direct Materials
Explanation:
A period cost is any cost that cannot be capitalized into prepaid expenses, inventory, or fixed assets
Period cost goes straight to expense account
While
Production Cost do capitalizes through Inventory and later recognize as cost of goods sold.
