Question

1. If a machine has a cost of $40,000 and an accumulated depreciation of $20,000, what is the book value of the machine in the current year? 2. If we sell the machine in question 4 for $12,000, what is the amount of the gain or loss on the sale? 3. On August 7, 2019, David purchased equipment costing $70,000, with an estimated life of 5 years and an estimated salvage value of $6,800. Compute the depreciation expense David would recognize on this equipment in 2019, assuming the company uses the straight-line method: (Round to the nearest full month) 4. On January 24, 2019 Sweet Ice Cream Co. purchased equipment costing $190,000, with an estimated life of 6 years and an estimated salvage value of $45,000. Compute the depreciation expense Sweet would recognize on this equipment in 2019, assuming the company uses the 150% declining balance method, with no switching to straight line. (Round to the nearest full month) 5. Name two intangible assets 6. Which type of bond is fully guaranteed? 7. A lawsuit pending is a liability called

Answer 1

1. If a Machine has a cost of $40,000 and an accumulated depreciation of $20,000, what is the book value of machine in the current year?

Calculating the book value of an asset is the actual cost of the asset, minus the accumulated depreciation on the reporting date. These three amounts should be shown on the business balance sheet for all depreciated assets.

Answer:-

Book Value = Original Cost of Asset – Accumulated Depreciation

                Book Value = $40,000 - $20,000

Therefore Current Year Machine Value is equal to $20,000 .

2. If we sell the machine on question 4 for $12,000, what is the amount of the gain or loss on the sale?

If you sell the machine after 2024, you face loss, otherwise you will sell the machine.

3. On August 7,2019, David purchase equipment costing $70,000, with an estimated life of 5 years and an estimated salvage value of $6,800. Compute the depreciation expenses David would recognize on this equipment in 2019, assuming the company uses the straight line method: (Round to the nearest full amount)

Straight line depreciation method, the value of an asset will reduced uniformly over each period until it reaches its salvage value. Straight line depreciation is the most commonly used and straightforward depreciation method for allocating the cost of a capital asset. It is calculated by simply dividing the cost of an asset, less its salvage value, by the useful life of the asset. Straight line depreciation method, the value of an asset will reduced uniformly over each period until it reaches its salvage value. Straight line depreciation is the most commonly used and straightforward depreciation method for allocating the cost of a capital asset. It is calculated by simply dividing the cost of an asset, less its salvage value, by the useful life of the asset.

Answer:-

Annual Depreciation Expenses = (Cost of the Asset – Salvage Value) / Useful Life of Asset.

Annual Depreciation Expenses = $70,000 – $6,800/5

Annual Depreciation Expenses = $63,200/5

Annual Depreciation Expenses = $12,640

Rounded Value (Annual Depreciation Expenses = $12,700

4. On January 24,2019 Sweet Ice Cream & Co. Purchased equipment costing $1,90,000, With an estimate life of 6 Years and an estimate salvage Value of $45,000. Compute the depreciation expenses Sweet would recognized on this equipment in 2019, assuming the company uses the 150% declining balance method, with no switching to straight line.

Depreciation Rate = 1.5 x 10% = 15%

Depreciation for a Period = 15% x Book Value at Beginning of the Period.

Asset Cost: $190,000.00

Salvage Value: $45,000.00           

Useful Life (years): 6     

Depreciation Factor: 1.5               

Starting Month:                January

Starting Year:2019

Answer:- $88    

5. Name two Intangible Asset?

Intangible assets cannot be touched. While intangible assets do not have a physical presence, they add value to your business. Intangible assets are long-term assets, meaning you will use them at your company for more than one year. There are more example in intangible assets Here I mention only two Examples of intangible assets Goodwill, Copyrights

(i) Goodwill:- Goodwill measures several factors that affect your brand’s value. Examples of goodwill include your company’s reputation, strategies, customer base, and employee relations.

(ii) Copyright:-Copyright refers to the legal right of the owner of intellectual property. In simpler terms, copyright is the right to copy. This means that the original creators of products and anyone they give authorization to are the only ones with the exclusive right to reproduce the work.

6. Which type of bond fully Guaranteed?

A guaranteed bond is a debt security that offers a secondary guarantee that interest and principal payments will be made by a third party, should the issuer default due to reasons such as insolvency or bankruptcy. A guaranteed bond can be municipal or corporate and backed by a bond insurance company, a fund or group entity, a government authority, or the corporate parents of subsidiaries or joint ventures that are issuing bonds.

Guaranteed bonds are considered very safe investments as bond investors enjoy the security of not only the issuer but also of the backing company. In addition, these types of bonds are mutually beneficial to the issuers and the guarantors. Issuers can often get a lower interest rate on debt if there is a third-party guarantor, and the third-party guarantor receives a fee for incurring the risk that comes with guaranteeing another entity's debt. Corporate and municipal bonds are issued to raise funds from investors for a certain period of time, after which the principal investments are repaid. In effect, bonds are a financial instrument used by companies or governmental bodies to borrow money from investors. During the life of the bond the issuing entity makes periodic interest payments, known as coupons, to bondholders as a return on investment. Many investors purchase bonds for their portfolios due to this interest income that is expected every year. However, bonds have an inherent risk of default, as the issuing corporation or municipality may have insufficient cash flow to fulfill its interest and principal payment obligations. This means that a bondholder may never get his or her principal back upon maturity and may lose out on periodic interest payments.

7. A Lawsuit pending is a liability called

A contingent liability is a liability or a potential loss that may occur in the future depending on the outcome of a specific event. Potential lawsuits, product warranties, and pending investigation are some examples of contingent liability.

If the amount can be estimated, the company sets aside that amount separately to be paid out when the liability arises. Contingent liability as a term does not apply only to companies, but to individuals as well. Contingent liabilities are recorded to ensure that the financial statements are accurate and meet GAAP or IFRS requirements.