Question

Thomas Inc. purchased a machine on Jan 1, 2007, cout $100.000, expected salvage value $15,000, five year s uses the double declining balance method of depreclatien. useful ife. 14. Determine the book value of Thomas's machine on December 31. 2008 A. $100,000 S85.000 C $60,000 o. $36,000 E. None of the above 15. Determine Thomas's depreciation expense in 2009. A. $10,000 B S40.000 C$14,400 D. $36,000 E. None of the above A machine had a book value of $36,000 on January 1, 2008 and monthly depreciation of $500 per month using the straight-line Determine the gain or loss associated with selling the $25,000 cash on July 1, 2009. A Neither a gain or loss is recognized on this type of transaction. B. A gain on sale of $2,000. C. A loss on sale of $1,000 D. A gain on sale of S1,000. E. A loss on sale of $2,000. 17. Buying stock in a corporation is attractive to investors because: A. Stockholders are not liable for the corporation's actions and debts. 8. Stock is easily transferred. C. A corporation has unlimited life. D. Shareholders can earn dividends. E. All of these. 18. Stockholders' equity consists of A Long-term assets. B. Paid-in capital and retained earnings. C. Paid-in capital and par value. D. Retained earnings and cash. E. Premiums and discounts 19. Retained earnings. A. Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception. B. Can be increased when the company issues new shares C. Represent an amount of cash available to pay shareholders. D. Represent the amount of cash available to pay creditors. E. All of these

Answer 1

Details given in question are as follows:

Cost $100,000

Salvage $15000

Life 5 years

Hence, we need to first calculate Depreciation for a single year in straight line method

Cost / Life in a year i.e. $100,000/5 = $20000

$20000/$100000 = 20% Depreciation, hence in double declining method of depreciation we have to consider double effect i.e. 20%*2 = 40% depreciation per year

Hence, following chart we clarify the depreciation and closing value of the asset for that particular year :

Opening Balance Rate Depreciation Closing Balance Year

100000 40% 40000 60000 2007

60000 40% 24000 36000 2008

36000 40% 14400 21600 2009

21600 30.56% 6600 15000 2010

Here in last year we have changed rate of depreciation, because of we have to maintain closing balance of $15000

Hence as per the above working and calculation our answer will be :

For Q.14 - Answer is Option C i.e. Book value of Thomas's machine as on December 31, 2008 was $36,000

For Q.15 - Answer is Option D i.e. Thomas's depreciation expense in 2009 was $14400

For more details you can refer attached image

Note :