Question

38. Cost of design, construction, and operation of a pilot plant not used for commercial production should be allocated to: a. Plant asset b. Equipment Research and development d. Other expenses c. 39. How should internally generated assets be accounted for? Recorded in the same way as purchased intangible assets b. It is not possible to create intangible assets a. They are generally expensed except for legal fees, which are capitalized d. Completed expensed c. 40. If a substantial repair is made to replace a part in a machine due to wear and tear, the expenditure should appear in which general ledger account: a. Accounts receivable b. Depreciation Machinery d. Repairs expense C. Iryna Corp. bought a multiple-bit press costing $1,080,000 with an estimated useful life of 10 year and an estimated salvage value of $90,000. Iryna expects the machine to produce 110,000 units over its lifetime. In year 1 it produced 12,000 units and in year 2 it produced 18,000 units. 41. Using Double-declining-balance method, what is the depreciation expense for year 2? 42. Using Units of production method, what is the depreciation expense in years 1 and 2 43. Using the Sum-of-the-years method, what is the depreciation expense for year 2? 44. Under the straight-line method, what is the depreciation expense in Years 1 and 2 On January, Sheslyne Company issued $6,000,000 of 10 % bonds and received $6,269,160. Interest is payable semi-annually on June 30 and December 31. The bonds mature in 6 years. The straight-line method is used to amortize premiums and discounts. 45. Record the issuance of the bonds on Sheslyne's books 46. Record the first interest payment 47. What the interest expense in year 1 48. Record the maturity of the bonds

Answer 1

38-	C	research and development
39-	A	recorded in the same way as purchased intangible asset
40-	C	Machinary
41-
Straight line rate of depreciation =1/life of machine	1/10	10%
double declining rate = straight line rate*2	10*2 = 20%
Year	beginning value	rate	Annual depreciation	year end book value
1	1080000	20%	216000	864000
2	864000	20%	172800	691200
2nd year depreciation	172800
42-Depreciation using units of production method - year 1= (cost of machine-salvage value)*(units produced/total capaity to produce)	(1080000-90000)*(12000/110000)	108000
42-Depreciation using units of production method - year 2= (cost of machine-salvage value)*(units produced/total capaity to produce)	(1080000-90000)*(18000/110000)	162000
43- Depreciation using sum of Year digit method of depreciation in Year 2 = (cost of machine-scrap value)*(9/55)	(1080000-90000)*(9/55)	162000
sum of Year digit	(10+9+8+7+6+5+4+3+2+1)	55
44-Staight line method of depreciation for year 1 & 2 = (cost of machine-scrap value)/life of machine	(1080000-90000)/10	99000
45-
date	explanation	debit	credit
1-Jan	cash	6269160
	premiumon bonds		269160
	bonds payable		6000000
46-
30-Jan	Interest expense	286542
	premiumon bonds	13458
	cash		300000
47-
Interest expense in Year 1	286542*2	573084
48-
31-Dec	bonds payable	6000000
	cash		6000000