Need help A company's income statement for the year ended 31December 20X5 showed a net profit of $83,600. It was laterfound that $18,000 paid for the purchase of a motor van hadbeen debited to the motor expenses account. It is thecompany's policy to depreciate motor vans at 25% per yearon the straight-line basis, with a full year's charge in the yearof acquisition.What would the net profit be after adjusting for thiserror?

Step 1: Introduction to the Profit CalculationCalculation of profit made by a company involves…

Answered: A company's income statement for the…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter2: Asset And Liability Valuation And Income Recognition

Section: Chapter Questions

Problem 5QE

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Daly Publishing Corporation recently purchased a truck for $43,000. Under MACRS, the first year's depreciation was $8,600. The truck driver's salary in the first year of operation was $61,800. The company's tax rate is 30 percent. Required: 1-a. Calculate the after-tax cash outflow for the acquisition cost and the salary expense. 1-b. Calculate the reduced cash outflow for taxes in the first year due to the depreciation. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Calculate the after-tax cash outflow for the acquisition cost and the salary expense. After-Tax Cash Outflow Acquisition cost Salary expense
Daly Publishing Corporation recently purchased a truck for $30,000. Under MACRS, the first year’s depreciation was $6,000. The truck driver’s salary in the first year of operation was $32,000. The company’s tax rate is 30 percent. Required: 1-a. Calculate the after-tax cash outflow for the acquisition cost and the salary expense. 1-b. Calculate the reduced cash outflow for taxes in the first year due to the depreciation.
On April 30, Year 1, Tilton Products purchased machinery for $44,000. The useful life of this machinery is estimated at 8 years, with an $4,000 residual value. Tilton uses a calendar year - end for financial reporting. Assume that in its financial statements, Tilton Products uses the 150% - declining - balance method and the half-year convention. Depreciation expense in Year 1 and Year 2 will be: Multiple Choice $4, 125 in Year 1 and $7.477 in Year 2. $8, 250 in Year 1 and $8, 250 in Year 2. $7,500 in Year 1 and $6, 844 in Year 2. $8, 250 in Year 1 and $7,477 in Year 2.
UMPI Corporation purchased conveyor equipment with a list price of $15,000. Presented below are three independent cases related to the equipment. (Round to the nearest dollar.) Instructions: Prepare the general journal entries required to record the acquisition and payment in each of the independent cases below. 6.1 UMPI paid cash for the equipment 8 days after the purchase. The vendor’s credit terms are 2/10, n/30. Assume that equipment purchases are initially recorded gross. 6.2 UMPI traded in equipment with a book value of $2,000 (initial cost $8,000), and paid $8,500 in cash. The old equipment could have been sold for $1,400 at the date of trade. (The exchange did have commercial substance.) 6.3 UMPI signed an interest-bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time.
On April 30, Year 1, Tilton Products purchased machinery for $88,000. The machinery is expected to have an 8-year life and an estimated residual value of $8,000. Tilton uses a calendar year-end for financial reporting. Refer to the information above. Assume that in its financial statements, Tilton Products uses the 200% - declining - balance method, using the half-year convention. Depreciation expense in Year 1 and Year 2 will be: Multiple Choice $11,000 in Year 1 and $19,250 in Year 2. $22,000 in Year 1 and $19,250 in Year 2. $22,000 in Year 1 and $16,500 in Year 2. $11,000 in Year 1 and $22,000 in Year 2.
On October 1, Bentley Delivery Services acquired a new truck with a list price (fair market value) of $75,000. Bentley Delivery received a trade-in allowance (fair market value) of $24,000 on an old truck of similar type and paid cash of $51,000. The following information about the old truck is obtained from the account in the equipment ledger: cost, $56,000;accumulated depreciation on December 31, the end of the preceding fiscal year, $35,000; annual depreciation, $7,000. Assuming that the exchange has commercial substance, journalize the entries to record (a) the current depreciation of the old truck to the date of trade-in and (b) the transaction on October 1.
.8 per year on the straight line basis, assuming a residual value at the end of five years of $4,000, with a proportionate depreciation charge in the years of purchase and disposal. A business purchased a motor car on 1 July 20X3 for $20,000. It is to be depreciated at 20 per cent The $20,000 cost was correctly entered in the cash book but posted to the debit of the motor vehicles repairs account. How will the business profit for the year ended 31 December 20X3 be affected by the error? Understated by $18,400 Understated by $16,800 Overstated by $18,400 Overstated by $16,800 A C (2 marks)
Loban Company purchased four cars for 9,000 each and expects that they will be sold in 3 years for 1,500 each. The company uses group depreciation on a straight-line basis. Required: 1. Prepare journal entries to record the acquisition and the first years depreciation expense. 2. If one of the cars is sold at the beginning of the second year for 7,000, what journal entry is required?
Steele Corp. purchases equipment for $30,000. Regarding the purchase, Steele paid shipping of $1,200, paid installation fees of $2,750, pays annual maintenance cost of $250, and received a 10% discount on sales price. Determine the acquisition cost of the equipment.
A company, which makes up its financial statements annually to 31 December,provides for depreciation of its machinery at the rate of 10 per cent per annum on thediminishing balance method. On 31 December 19X6, the machinery consisted ofthree items purchased as under:1. On 1 January 19X4 Machine A Cost N$3 0002. On 1 April 19X5 Machine B Cost N$2 0003. On 1 July 19X6 Machine C Cost N$1 000
Assume that equipment is purchased at a cost of $10,000 with no residual value and isdepreciated at a straight line rate of 10%.The equipment was sold for cash on Oct 12 ofthe eighth year of its use. The balance of accumulated depreciation account as of thepreceding Dec 31 (end of 7th yr) is $7,000.Required:a. Entry to update the depreciation for the 9 months of the current year .b. Assuming that the equipment was sold for $ 2,800 on Oct 12, determine the gain orloss on the sale of equipment.c. Journalize the entry to record the sale.Hint: calculate book value of the equipment as on oct 12 and compare with the amount of cash gettingin return.
In Year 10, the Perasso Meat Packing Company changed the depreciation method used from the straight-line method to an accelerated method. Depreciation recorded in prior years on existing equipment was $126,000 applying the straight- line method. Depreciation in prior years would have been $186,000 if the accelerated method had been used. Assuming an income tax rate of 20%, Perasso's increase in Year 10's beginning retained earnings would be: A. $80,000 B. $48,000 C. $32,000 D. $0

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