A stock index is valued at $800 and pays a continuous dividend at the rate of 3% per year. The 6-month futures contract on that
1 answer:
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Answer:
B) Debit to accumulated depreciation for $22,500.
Explanation:
As for the information provided,
Depreciation under straight line method for each year = ($45,000 - $5,000)/8 = $5,000 for each year.
Depreciation for 4 years = $5,000 4 = $20,000
Depreciation in 5th year for 6 months = $5,000/2 = $2,500
Total depreciation till 1 July Year 5 = $20,000 + $2,500 = $22,500
Carrying value of equipment in books as on date of sale = $45,000 - $22,500 = $22,500
Sale price = $20,000
Profit or loss on sale of equipment = $20,000 - $22,500 = - $2,500
So therefore, there is loss of $2,500
Thus, option c and option d are invalid.
Further cash received on sale is debited and not credited thus, option a is also invalid.
As the total accumulated depreciation = $22,500
The correct entry will include debit to accumulated depreciation of $22,500.
Thus, option b is correct.
Answer
The answer and procedures of the exercise are attached in the following archives.
Step-by-step explanation:
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
