Hi,
I need help on these two problems and would greatly appreciate anyone’s help.
1. Mexico Supply Co. has the following transactions related to notes receivable during the last 2 months of 2005.
Nov. 1 Loaned $18,000 cash to Norma Hanson on a 1-year, 10% note.
Dec. 11 Sold goods to John Countryman, Inc. receiving a $6,750, 90-day, 8% note.
Dec. 16 Received a $4,000, 6-month, 9% note in exchange for Bob Shabo's outstanding accounts receivable.
Dec. 31 Accrued interest revenue on all notes receivable.
Dec. 31 Dr. Interest Receivable = ?
Cr. Interest Revenue = ?
This is what I’ve done so far:
Nov. 1 interest = $18,000 * 0.1 * 2/12 = $300
Dec. 11 interest = $6,750 * 0.08 * 2/12 = $90
Dec. 16 interest = $4,000 * 0.09 * 2/12 = $60
Interest on Dec. 31 = $300 + $90 + $60 = $450 Is this correct?
I also have to record the collection of the Hanson note at its maturity in 2006. Is the following correct?
Dr. Cash $19,800
Cr. Interest receivable $1,500
Cr. Interest revenue $300
Cr. Notes receivable $1,800
2. Solo Company purchased a new machine on October 1, 2005, at a cost of $96,000. The company estimated that the machine will have a salvage value of $12,000. The machine is expected to be used for 10,000 working hours during its 5-year life.
Compute the depreciation expense under the following methods for the year indicated.
(a) Straight-line for 2005.
(b) Declining-balance using double the straight-line rate for 2005 and 2006.
This is what I’ve done so far:
(a) $96,000 - $12,000 = $84,000
$84,000 / 5 = $16,800
$16,800 * 3/12 = $4200 Is this correct?
(b) 2005
$96,000 * 0.4 * 3/12 = $9600 Is this correct?
2006
Find the book value = $96,000 - $9600 = $86,400
$86,400 * 0.4 = $34,560 Is this correct?
Thank you very much.
SPHI
