Question

Abdulaziz Co purchased a machine in 2013 for 50,000 that has a useful life of 5 years with a salvage value of 5,000. Calculate the depreciationexpense, accumulated depreciation, book value throughout its useful life using 1-Straight-line Method. 2- Units of Production Methodifthe machine produces 100,000 units. Here is a table of units produced each year: Second Third F First 23,000 ourth 30,000 Fifth 22.000 25,000 - 3- Double Declining Balance Method (2 Marks). Q2-On June 1, 2019, ABC Company signed a $25,000, 120-day, 6% note payable to cover a past due account payable. a. Whatis the total amount of interest to be paid on this note? b. Prepare ABC Company's generaljournal entry to record the issuance of the note payable c. Prepare ABC Company's generaljoumal entry to record the payment of the note on September 29, 2019 (2 marks). Q3. What are the characteristics of corporations (1 mark)

Answer 1

Q1)

1) Straight line method:

Depreciation Expense = (Cost of the asset - Salvage Value)/Number of years of useful life

= ($50,000 - $5,000) / 5 years

= $9,000

Depreciation under straight-line method is same for all years so depreciation is $9,000 for all years.

Years	Depreciation Expense (a)	Accumulated Depreciation (a+a)	Book Value at the end (b) (b-a)
2013	$9,000	$9,000	$41,000
2014	$9,000	$18,000	$32,000
2015	$9,000	$27,000	$23,000
2016	$9,000	$36,000	$14,000
2017	$9,000	$45,000	$5,000
	$45,000		$5,000
Therefore, the accumulated depreciation at the end of 5th year is $45,000 and the book value of the asset at the end of the 5th year is $5,000.

2)

Units of Production Method:

Depreciation per unit = (Cost of the asset - Salvage value) / Total estimated number of units

= ($50,000 - $5,000) / 100,000 units

= $0.45 per unit

Depreciation expense = Cost per unit * Number of units in that year

Year 1:

Depreciation expense = $0.45 per unit * 23,000 units

= $10,350

Year 2:

Depreciation expense = $0.45 per unit * 25,000 units

= $11,250

Year 3:

Depreciation expense = $0.45 per unit * 0 units

= $0

Year 4:

Depreciation expense = $0.45 per unit * 30,000 units

= $13,500

Year 5:

Depreciation expense = $0.45 per unit * 22,000 units

= $9,900

Years	Depreciation Expense (a)	Accumulated Depreciation (a+a)	Book Value at the end (b) (b-a)
2013	$10,350	$10,350	$39,650
2014	$11,250	$21,600	$28,400
2015	$0	$21,600	$28,400
2016	$13,500	$35,100	$14,900
2017	$9,900	$45,000	$5,000
	$45,000		$5,000
Therefore, the accumulated depreciation at the end of 5th year is $45,000 and the book value of the asset at the end of the 5th year is $5,000.

3) Double-Declining balance method:

Year 1:

Depreciation Expense = Cost of asset / Number of years of useful life * 2

= $50,000 / 5 years * 2

= $20,000

Year 2:

Depreciation Expense = Cost of asset - Last year depreciation / Number of years of useful life * 2

= $50,000 - $20,000 / 5 years * 2

= $12,000

Year 3:

Depreciation Expense = Cost of asset - Last year depreciation / Number of years of useful life * 2

= $50,000 - $20,000 - $12,000 / 5 years * 2

= $7,200

Year 4:

Depreciation Expense = Cost of asset - Last year depreciation / Number of years of useful life * 2

= $50,000 - $20,000 - $12,000 - $7,200 / 5 years * 2

= $4,320

Year 5:

Depreciation Expense = Cost of asset - Last year depreciation / Number of years of useful life * 2

= $50,000 - $20,000 - $12,000 - $7,200 - $4,320 / 5 years * 2

= $2,592

Years	Depreciation Expense (a)	Accumulated Depreciation (a+a)	Book Value at the end (b) (b-a)
2013	$20,000	$20,000	$30,000
2014	$12,000	$32,000	$18,000
2015	$7,200	$39,200	$10,800
2016	$4,320	$43,520	$6,480
2017	$2,592	$46,112	$3,888
	$46,112		$3,888
Therefore, the accumulated depreciation at the end of 5th year is $46,112 and the book value of the asset at the end of the 5th year is $3,888

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Q2)

a)

Total Interest ($25,000*6/100*120 days/365 days = $$493

b)

Date	Accounts Titles and Explanations	Debit	Credit
Jun. 1, 2019	Accounts Payable	$25,000
	6% Notes Payable		$25,000
	(To record the issue of 6% note for past due accounts payable)

c)

Date	Accounts Titles and Explanations	Debit	Credit
Sep. 29, 2019	6% Notes Payable	$25,000
	Interest Expense ($25,000*6/100*120 days/365 days)	$493
	Cash
	(To record the payment of the note along with accrued interest)

Note: As per HOMEWORKLIB RULES, the first question should be answered but i have answered the first two questions, hence, please post the third question separately. Please do not give a thumb down for not answering all the questions as i have followed the HOMEWORKLIB RULES.