Depreciation schedules and methods

Nov 1st, 2014
Steve1995
Category:
Accounting
Price: $45 USD

Question description

Present your analysis of the assigned problems in Excel format. Enter non-numerical responses in the same worksheet using textboxes.

On January 9, 2010, Swifty Delivery Service purchased a truck at a cost of $67,000. Before placing the truck service, Swifty spent $2,200 painting it, $500 replacing tires, and $5,000 overhauling the engine. The truck should remain in service for 6 years and have a residual value of $14,700. The truck's annual mileage is expected to be 15,000 miles in each of the first 4 years and 10,000 miles in each of the next 2 years- 80,000 miles in total. In deciding which depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance).

Requirements:

1. Prepare a depreciation schedule for each depreciation method, showing asset cost , depreciation expense, accumulated depreciation, and asset book value.

2. Swifty prepares financial statements using the depreciation method that reports the highest  net income in the early years of asset use. For income-tax purposes, the company uses the depreciation method that minimizes income taxes in the early years. Consider the first year that Swifty uses the truck. Identify the depreciation methods that meet the general manager's objectives, assuming the income tax authorities permit the use of any of the methods. 



The Balance sheet of Ballcraft, Inc., reported the following:

Preferred stock,$6 par, 6%

         5,000 shares authorized and issues............................    $    30,000

Common stock,$4.00 par value, 45,000 shares authorized;

         10,000 shares issues....................................................          40,000

Additional paid-in capital-common.........................................       219,000

Total paid-in capital................................................................        289,000

Retained earnings..................................................................           90,000

Total stockholder's equity.......................................................       $379,000

Preferred dividends are in the arrears for two years, including the current year. On the balance sheet date, the market value of the Ballcraft common stock was $31 per share.

Requirements:

1. Is the preferred stock cumulative or noncumulative? How can you tell?

2. What is the total paid-in capital of the company?

3. What was the total market value of the common stock?

4. Compute the book value per share of the common stock?



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