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1) Company purchased equipment for $60,000 on January 1, 2018
1) Company purchased equipment for $60,000 on January 1, 2018. The estimated useful life of the equipment is 5 years, with a residual value of $5000 at the end of five years. using straight-line method, depreciation expense for 2018 would be?
2) A company had 400,000 shares of $10 per value common stock outstanding. The amount of additional paid in capital is $2 million and retained earnings is $600,000. The company issues a 2-for-1 stock split. The market price of the stock is $14. What is the balance in the common stock account after the issuance?
Expert Solution
1) Computation of the depreciation expense for 2018:-
Depreciation expense = (Cost - Salvage value) / Estimated useful life
= ($60,000 - $5,000) / 5
= $55,000 / 5
= $11,000
2) Computation of the balance in common stock account after the issuance:-
Balance in common stock account = Number of shares after split * Par value of share after split
= 400,000 * 2 * $10 / 2
= $4,000,000
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