Reference no: EM132736234

Questions -

Q1. Prepare the journal entries to record the following transactions for Reese Company, which has a calendar year end and uses the straight-line method of depreciation.

(a) On September 30, 2014, the company sold old equipment for $46,000. The equipment was purchased on January 1, 2012, for $96,000 and was estimated to have a $16,000 salvage value at the end of its 5-year life. Depreciation on the equipment has been recorded through December 31, 2013.

(b) On June 30, 2014, the company sold old equipment for $24,000. The equipment originally cost $36,000 and had accumulated depreciation to the date of disposal of $15,000.

Q2. Congratulations! You have just won the Powerball Lottery. You have three options to receive payment of your winnings. Which would you prefer (ignoring taxes), assuming you can invest your winnings and earn 6% compounded annually?

a) Receive $60 million today

b) Receive 20 annual payments of $5 million per year starting from next year.

c) Receive $150 million 20 years from now