year end is December 31 (a) Prepare the entry on June 1 when the note was issued
ID: 2547738 • Letter: Y
Question
year end is December 31 (a) Prepare the entry on June 1 when the note was issued. (b) P isted below associated with the note on the books of Holden Corporation. Holden's repare any adjusting entries necessary on December 31 in order to prepare the financial statements (c) Prepare the entry to record receipt of payment of the note at maturity. QUESTION 5 (15 marks) At the beginning of 2016, Orbit Airways purchased a Boeing aircraft at a cost of SA5 millio.Orit irways expects the plane to remain useful for 5 years and to be flown 3 million kilometers The residual value is expected to be $5 million. The plane was flown 800,000 kilometers in 2016 and 700,000 kilometers in 2017. REQUIRED: What is the amount of depreciation in 2016 and 2017 under each of the following three different methods of depreciation? Declining balance (30% rate). Straight-line. Units of output QUESTION 6 (3 marks) Hot Spots Inc. has a December 31 year-end It sells Saunas and Jacuzzis with a two year warranty. Information on the warranty payable account for 2017 follows . Beginning balance of $40,000 (normal balance), nnty expense in 2017 of $80,000, a 000 (normal balance)Explanation / Answer
A. Declining Balance method Depreciation = Depreciation Rate × Book Value of Asset
For 2016 Book value is 45,000,000 and rate is 30%
So 2016 depreciation = 4500000 * 30 / 100 = 13,500,000.
For 2017 book value = 45000000 - 13500000 = $ 31,500,000 and rate will be 30%
So 2017 Depreciation = 31500000 * 30 / 100 = $ 9,450,000
B. In case of straight line method the depreciation is calculated as follows
(Total value - Salvage value) / Useful Life
= (45000000 - 5000000) / 5 = 40000000 / 5 = $8,000,000.
It will be same for all the years for 2016 and 2017.
C. Depreciation = Number of Units Produced× (Cost Salvage Value) / Life in Number of Units
For 2016 number of units produced is 800,000 and total life is 3,000,000
= 800,000 * (45,000,000 - 5,000,000) / 3,000,000
= 800000 * 40000000 / 3000000 = 8*4,000,000 / 3 = 10,666,667 (2016 Depreciation).
For 2017 number of units produced is 700,000 and total life is 3,000,000
= 700,000 * (45,000,000 - 5,000,000) / 3,000,000
= 700000 * 40000000 / 3000000 = 7*4,000,000 / 3 = $9,333,333 (2017 Depreciation).
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