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Three Accounting Questions

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Question;P9-28A;On January 9, 2010, Swifty Delivery Service;purchased a truck at cost of $67,000. Before placing the truck in service;Swifty spent $2,200 painting it, $500 replacing tires, and $5,000 overhauling;the engine. The truck should remain in service for 6 years and have a residual;value of $14,700. The truck's annual mileage is expected to be 15,000 miles in;each of the first 4 years and 10,000 miles in each of the next 2 years--80,000;miles in total. In deciding, which depreciation method to use, Jerry Speers;the general manager, requests a depreciation schedule for each of the;depreciation methods (straight line, units of production, and double declining;balance).;Requirements;1. Prepare a depreciation schedule for each;depreciation method, showing asset cost, depreciation expense, accumulated;depreciation, and asset book value.;2. Swifty prepares financial statements using the;depreciation method that reports the hightest net income in the early years of;asset use. For income tax purposes, the company uses the depreciation method;that minimizes income taxes in the early years. Consider the first year that;Swifty uses the truck. Identify the depreciation methods that meet the general;managers objectives, assuming the income tax authorities permit the use of any;of the methods.;P10A-9B;Calculating present value;Axel needs new manufacturing equipment. Two;companies can provide similar equipment but under different payment plans;Plan A: MRE offers to let Axel pay $55,000 each;year for five years. The payments include interest at 12% per year.;Plan B: Westernhome will let Axel make a single;payment of $425,000 at the end of five years. This payment includes both;principal and interest at 12%.;Requirements;1. Calculate the present value of Plan A.;2. Calculate the present value of Plan B.;3. Axel will purchase the equipment that costs the;least, as measured by present value. Which equipment should Axel select? Why?;P11-29A;The balance sheet of Ballcraft, Inc.;reported the following;Preferred stock, $6 par, 6%;5,000 shares authorized and issued..................................... $30,000;Common stock, $4.00 par value, 45,000 shares;authorized;10,000 shares issued......................................... $40,000;Additional paid-in-capital-common........................ $219,000;Total paid-in-capital..................................................;$289,000;Retained earnings.................................................... $90,000;Total stockholder's equity......................................... $379,000;On the;balance sheet date, the market value of the Ballcraft common stock was $31 per;share.;Requirements;1. Is the preferred stock cumulative or;noncumulative? How can you tell?;2. What is the total paid-in-capital of the company?;3. What was the total market value of the common;stock?;4. Compute the book value per share of the common;stock.

 

Paper#37340 | Written in 18-Jul-2015

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