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#1
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Please solve this MCQ
On April 1, 2000, Sanders Construction paid $10,000 for equipment with an estimated useful life of 10 years and a residual value of $2,000. This company uses the double-declining-balance method of depreciation and applies the half-year convention to fractional periods. In 2001, the amount of depreciation expense to be recognized on this equipment is:
$1,600 $1,440 $1,280 Some other amount According to book, ans is $1800. |
#2
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Carter and Dixie have capital account balances of $80,000 and $100,000, respectively, at the beginning of 2000. Their partnership agreement provides for interest on beginning capital account balances, 10%; salaries to Carter, $30,000, and to Dixie, $24,000; residual income or loss divided 60% to Carter and 40% to Dixie. Partnership net income for 2000 is $62,000. Neither partner made any additional investment in the partnership during 2000, but Carter withdrew $1,500 monthly and $1,000 monthly throughout 2000. The partnership balance sheet at December 31, 2000, should include:
Carter, Capital, $94,000 Carter, Capital, $100,000 Dixie, Capital, $30,000 Total partners’ equity, $242,000 Answer is that Carter's Capital, 94,000. Can anyone explain? |
#3
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Quote:
net income to be divided .............................. 62000 salary deductions: Carter............................................ ..............(30000) Dixie............................................. ..............(24000) Interest allowance deductions: Carter(10 % of 80000)...................................(8000) Dixie(10 % of 100000)....................................(10000) Residual Income............................................ ..(10000) {62-30-24-8-10} Residual Income allocation Carter(60 % of 10000)...................................(6000) Dixie............................................. ...............(4000) Carter Capital account Opening capital of carter................................80000 Add: interest.......................................... ......8000 salary............................................ ......30000 Less: Residual loss.......................................(6000) Drawings(12*1,500)............................ (18000) Closing Capital of carter................................... 94000 |
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Fatima Saleem (Friday, January 05, 2018) |
#4
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Hello Fatima.
First you have to know what a double declining method of depreciation is. The rate is found by straight line method. (Book Value - Salvage Value)/Periods. (10,000-2,000)/10 = 800 800/8,000= 10% is the rate for straight line method. Because it is double declining method, we use double this rate which becomes 20%. Now Half Year Convention says no matter what month a Depreciable Property is bought, it will be depreciated for half the year. The property was bought in April. In Double Declining method we use the Book Value 10,000 * 20% =2,000 for the first year. We pay half for the first year i.e. 1,000. Book Value Depreciation Rate Expense 10,000 20% 1,000 (half for first year) 9,000 20% 1,800 This is how we get 1,800 as answer |
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