On January 1, 2011, Borba, Inc. purchased a 100,000 machine with ...

[lracut11]

On January 1, 2011, Borba, Inc. purchased a 100,000 machine with an estimated useful life of 10 years or 1,000,000 units and a 10,000 salvage value. The machine actually produced 120,000 units in 2011 and 110,000 units in 2012.
 
  Part A: Calculate depreciation expense and accumulated depreciation using the following three methods:
  December 31, 2011: Straight-line Activity Double-declining
  balance
  1 Depreciation expense  
  2 Accumulated depreciation  
 
  December 31, 2012: Straight-line Activity Double-declining
  balance
  3 Depreciation expense  
  4 Accumulated depreciation  
 
  Part B: In the first year of the machine's life, which method would show the LOWER amount for each of the following financial statement line items? Put an X in the appropriate box.
  Financial statement item Straight-line Double-declining balance
  1 Net income
  2 Income tax expense
  3 Retained earnings
  4 Total assets

Question 2

In establishing a petty cash fund, a check is written for the amount of the fund and is recorded as a debit toAccounts Payable and a credit to Petty Cash.
 a. True
  b. False
 
   Indicate whether the statement is true or false

[emsimon14]

Answer to Question 1

Part A:
December 31, 2011: Straight-line Activity Double-declining balance
1 Depreciation expense 9,000 10,800 20,000
2 Accumulated depreciation 9,000 10,800 20,000

December 31, 2012: Straight-line Activity Double-declining balance
3 Depreciation expense 9,000 9,900 16,000
4 Accumulated depreciation 18,000 20,700 36,000

Straight-line depreciation: (100,000  10,000) / 10 years = 9,000 per year
Activity depreciation: (100,000  10,000) / 1,000,000 units = 0.09 per unit
For 2011: 120,000 units x 0.09 per unit = 10,800
For 2012: 110,000 units x 0.09 per unit = 9,900
Double-declining balance depreciation:
For 2011: 100,000 x (2 / 10) = 20,000
For 2012: (100,000  20,000) x (2 / 10) = 16,000

Part B:
Straight-line Double-declining balance
1 Net income X
2 Income tax expense X
3 Retained earnings X
4 Total assets X

Answer to Question 2

False

[lracut11]

Thank you

[emsimon14]

Happy to help you