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Homework answers / question archive / 1) Machinery purchased for $69,600 by Tamarisk Co

1) Machinery purchased for $69,600 by Tamarisk Co

Accounting

1) Machinery purchased for $69,600 by Tamarisk Co. in 2016 was originally estimated to have a life of 8 years with a salvage value of $4,640 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2021, it is determined that the total estimated life should be 10 years with a salvage value of $5,220 at the end of that time. Assume straight-line depreciation. Prepare the entry to correct the prior years' depreciation, if necessary. (If no entry is required, select "No entry" for the account titles and enter Ofor the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit eTextbook and Media List of Accounts Prepare the entry to record depreciation for 2021 (If no entry is required celert. "No entry for the account titles and enter for the

2)

Amo Tech, an Indian Company signs a contract to buy 1000 computers from a French retailer Martin Bro. for €50 per computer on the condition that payment will be made at the time of delivery. Thus, Amo Tech expects that when they accept delivery of the computers, they will be obligated to pay the amount agreed upon of €50000, in the exchange rate of Rupee at the time of the sale. However, it took a few months for delivery. In the meantime, due to unforeseen circumstances, the value of the Indian Rupee depreciated.

a. Explain the role of foreign exchange risk management.

b. Discuss the impact of depreciation of rupees on the buyer and seller.

3) The particular analytical measures chosen to analyze a company may be influenced by all of the following except a. product quality or service effectiveness b. general economic environment c diversity of business operations d. industry type

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1)

Solution

Accounts title and explanation Debit Credit
Accumulated depreciation $    8,410  
Depreciation expense   $    8,410
(To record correction)    

Alternate solution

Accounts title and explanation Debit Credit
Accumulated depreciation $    8,410  
Retained earnings   $    8,410
(To record correction)    

Working.

Old scenaio

Straight line Method
A Cost $ 69,600
B Residual Value $ 4,640
C=A - B Depreciable base $ 64,960
D Life [in years left ]                   8
E=C/D Annual SLM depreciation $ 8,120

.

Depreciation schedule-Straight line method
Year Book Value Depreciation expense Accumulated Depreciation Ending Book Value
2016 $         69,600 $       8,120 $        8,120 $     61,480
2017 $         61,480 $       8,120 $     16,240 $     53,360
2018 $         53,360 $       8,120 $     24,360 $     45,240
2019 $         45,240 $       8,120 $     32,480 $     37,120
2020 $         37,120 $       8,120 $     40,600 $     29,000

Correct and new scenario

Straight line Method
A Cost $ 69,600
B Residual Value $ 5,220
C=A - B Depreciable base $ 64,380
D Life [in years left ]                 10
E=C/D Annual SLM depreciation $ 6,438
Depreciation schedule-Straight line method
Year Book Value Depreciation expense Accumulated Depreciation Ending Book Value
2016 $         69,600 $       6,438 $        6,438 $     63,162
2017 $         63,162 $       6,438 $     12,876 $     56,724
2018 $         56,724 $       6,438 $     19,314 $     50,286
2019 $         50,286 $       6,438 $     25,752 $     43,848
2020 $         43,848 $       6,438 $     32,190 $     37,410
Depreciation that should be accounted till year 5 $ 32,190
Depreciation that is accounted till year 5 $ 40,600
Excess depreciation charged $    8,410

2) 

At the point when Rupee is devaluing/depreciation against Euro Amo Tech needs to pay more Indian Rupee to get 50000 Euro to provide for Martin Bro.

a)

Consequently, in such cases Amo tech could have support his situation by purchasing EURINR future agreement. For this situation he will bring in cash in future market and free cash in spot market and impact of devaluation of rupee will get invalidated.

b)

In the event that depreciation of Indian rupee Amo tech needs to pay more Indian rupee to purchase . Henceforth, it is a misfortune for the purchaser. Yet, Martin Bro. will get a similar amount of 50000 Euro and consequently no misfortune or gain for seller.

3)

The correct answer is option (a). Product quality or service effectiveness.

Analytical measures chosen to analyze a company is influenced by the following:

1)General economic environment

2) Diversity of business operations

3) Industry type

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