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Assume you are one of three members of the accounting staff working for a small, private company. At the beginning of this year, the company expanded into a new industry by acquiring equipment that will be used to make several new lines of products. The owner and general manager of the company has indicated that, as one of the conditions for providing financing for the new equipment, the company's bank will receive a copy of the company's annual finance statements. Another condition of the loan is that the company's total assets cannot fall below $250,000. Violation of this condition gives the bank the option to demand immediate repayment of the loan. Before making the adjustment for this year's depreciation, the company's total assets are reported at $255,000. The owner has asked you to take a look at the facts regarding the new equipment and "work with the numbers to make sure everything stays onside with the bank." A depreciation method has yet not been adopted for the new equipment. Equipment used in other parts of the company is depreciated using the double-declining-balance method. The cost of new equipment was $35,000 and the manager estimates it will be worth "at least $7,000" at the end of its four-year useful life. Because the products made with the new equipment are only beginning to catch on with consumers, the company used the equipment to produce just 4,000 units this year. It is expected that, over all four years of its useful life, the new equipment will make a total of 28,000 units. Required: 1. Calculate the depreciation that would be reported this year under each of the three methods shown in this chapter. Which of the methods would meet the owner's objective? 2. Evaluate whether it is ethical to recommend that the company use the method identified in requirement 1. What two parties are most directly affected by this recommendation? How would each party be benefited or harmed by the recommendation? Does the recommendation violate any laws or applicable rules? Are there any other factors that you would consider before making a recommendation?
On January 1, Hurley Corporation issues $2,000,000, 5-year, 12% bonds at 96 with interest payable on July 1 and January 1. The entry on December 31 to record accrued bond interest and the amortization of bond discount using the straight-line metho..
After all bills for the party were paid, the total came to $2,315. Details are $575 for hotel room rental, $640 for food, $750 for entertainment, and $350 for decorations. 100 persons attended the party. What is the main reason for the unfavorable..
Why would you use the percentage of sales method for calculating doubtful accounts as opposed to the percentage of receivables method? Is it appropriate to use a hybrid of the percentage of sales and the percentage of receivables methods of calcul..
On April 18, 2010, Jane Junipner purchased 30 shares of Bryan Corp. stock for $210, and on September 29, 2010 she purchased an additional 90 shares for $900. On November 28, 2010, she sold 48 shares which could not be specifically identified, for ..
Indicate the division of net income to each partner, and prepare the entry to distribute the net income.
fast delivery is a small company that transports business packages between new york and chicago. it operates a fleet of
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CGT Reliable Accounting Firm purchased some property on December 31, 2009, for $ 170,000, paying $ 40,000 in cash and obtaining a mortgage loan for the other $ 130,000. The interest rate is 9% per year, with $ 8055 payments made at the end of Marc..
the following summarized information relates to the installment-sales activity of phillops stores inc. for the year
Compute the amount of Coaches and Carriages' net income (or loss) for 2009 assuming that no dividends were paid and the owners made no additional contributions during the year.
Kat Inc. holds 75% of the outstanding common stock of Rax Corp. Rax currently owes Kat $500,000 for inventory acquired over the past few months. In preparing consolidated financial statements, what amount of this debt should be eliminated?
What are the advantages of the four different special journals? When would you use each type? What is a subsidiary ledger and what purpose does it serve?
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