Question

Q1- 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 depreciation expense, accumulated depreciation, book value throughout its useful life using: 1- Straight-line Method. 2- Units of Production Method if the machine produces 100,000 units. Here is a table of units produced each year: Third Fifth First 23,000 Second 25,000 Fourth 30,000 22,000 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. What is the total amount of interest to be paid on this note? b. Prepare ABC Company's general journal entry to record the issuance of the note payable c. Prepare ABC Company's general journal 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

Ans 1 Year Depreciation Schedule - Straight Line End of the Year Accounts Depreciation Accumulated Book Value Expense Depreciation $9,000 $9,000 $41,000 $9,000 $18,000 $32,000 $9,000 $27,000 $23,000 $9,000 $36,000 $14,000 $9,000 $45,000 $5,000 See Note (i) Ans 2 Year Depreciation Schedule - Double Declining Balance End of the Year Accounts Depreciation Accumulated Book Value Expense Depreciation $10,350 $10,350 $39,650 $11,250 $21,600 $28,400 $0 $21,600 $28,400 $13,500 $35,100 $ 14,900 $9,900 $45,000 $5,000 3 See Note (ii) 5 Ans 3 Year Depreciation Schedule - Double Declining Balance End of the Year Accounts Depreciation Accumulated Book Value Expense Depreciation $20,000 $20,000 $30,000 $12,000 $32,000 $18,000 $7,200 $39,200 $10,800 $4,320 $43,520 $6,480 $1,480 $45,000 $5,000 See Note (iii)

Accumulated Depreciation Book Value Note (i) Straight Line Depreciation Schedule Straight line depreciation = (Initial Cost-Salvage Value) / Estimated useful life Depreciation for the year Depreciation Year Actual Cost Depreciable Cost Useful Life Expense $50,000 $45,000 7 $9,000 $36,000 / 4 = $9,000 $27,000 / $9,000 $18,000 / $9,000 $9.000 / $9,000 Nw $9,000 $18,000 $27,000 $36,000 $45,000 $41,000 $32,000 $23,000 $14,000 $5,000 Note (ii) Unit of Production depreciation Estimated operate 100000 units (Initial Cost-Salvage Value) / Estimated units production - Depreciation per unit [($50000-$5000)/100000] = $ 0.45 per units Date Actual Cost Depreciation for the year Depreciable Per Number of Depreciation Unit units Expense Book Value Accumulated Depreciation (C) (A) (B) (A)-(C) $50,000 $10,350 23000 = 25000 = $11,250 $0.45 x $0.45 x $0.45 x $0.45 x $0.45 X $0 $10,350 $21,600 $21,600 $35,100 $45,000 $39,650 $28,400 $28,400 $14,900 $5,000 30000 = 22000 = $13,500 $9,900

Note (iii) Double Declining Balance Method (DDBM) = 2/Useful Life* Book Value Depreciation for the year Accumulated Depreciation Date Actual Cost DDB rate Book Value Book Value Expense Depreciation $50,000 $50,000 x 0.4 = $20,000 $20,000 $30,000 $30,000 x 0.4 = $12,000 $32,000 $18,000 $18,000 x 0.4 = $7,200 $39,200 $10,800 $10,800 x 0.4 = $4,320 $43,520 $6,480 $1,480 $45,000 $5,000 In year 5, depreciation is provided for $1480, to restrict the book value of the egipemtn to its salvage value i.e. $5000 OHNM +

Q2-a Note Payable rate days Interest $25,000 6% 120 $500 Q2-b Credit $25,000 $25,000 Date Account Title Debit June 1, 2019 Cash Notes Payable Sep 29, 2019 Interest Expense Notes Payable Cash Q2-C $500 $25,000 $25,500