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Q.1 Alexander Company purchased a piece of equipment for $12,000 and depreciated it for three years over a five-year estimated life with an expected residual value at the end of five years of $2,000. At the end of the third year, Alex decided to upgrade to equipment with increased capacity and sold the original piece of equipment for $7,200. Calculate the gain or loss on the disposal at the end of the third year.

 

Q.2 Tullahoma Company purchased equipment for $27,500. It depreciated the equipment over a fiveyear life by the double-declining-balance method until the end of the second year, at which time the asset was sold for $8,500. Calculate the gain or loss on the sale at the end of the second year.

 

Q.3 On January 2, 2011, Jansing Corporation acquired a new machine with an estimated useful life of five years. The cost of the equipment was $40,000 with a residual value of $5,000.

 

a. Prepare a complete depreciation table under the two depreciation methods listed below.

 

1. Straight-line.

2. 200 percent declining-balance.

3. 150 percent declining-balance with a switch to straight-line when it will maximize depreciation

expense.

Q.4 Millar, Inc., purchased a truck to use for deliveries and is attempting to determine how much depreciation expense would be recognized under three different methods. The truck cost $20,000 and is expected to have a value of $4,000 at the end of its five-year life. The truck is expected to be used at the rate of 10,000 miles in the first year, 20,000 miles in the second and third years, and 15,000 miles in the fourth and fifth years.

 

Instructions

a. Determine the amount of depreciation expense that will be recognized under each of the following

depreciation methods in the first and second years of the truck’s useful life. A full

year’s depreciation will be recognized in the first year the truck is used.

1. Straight-line.

2. Double-declining-balance.

 

Q.5 R&R, Inc., purchased a new machine on September 1, 2009, at a cost of $180,000. The machine’s estimated useful life at the time of the purchase was five years, and its residual value was $10,000.

 

Instructions

a. Prepare a complete depreciation schedule, beginning with calendar year 2009, under each of the methods listed below (assume that the half-year convention is used):

 

1. Straight-line.

2. 200 percent declining-balance.

3. 150 percent declining-balance (not switching to straight-line).

 

Q.6 Company offered 10,000 ordinary shares of Rs. 10 at Rs. 12. Company received 8,000 shares application. They allotted Shares against application receipt.

Requirement: Pass the necessary journal entries.

Q.7 Company offered 10,000 ordinary shares of Rs. 10 at Rs. 9. Company received 10,000 shares application. They allotted Shares against application receipt.

Q.8 Company offered 10,000 ordinary shares of Rs. 10 at Rs. 9. Company received 15,000 shares application. They allotted Shares against application receipt and refund excess money.

Requirement: Pass the necessary journal entries.