Managerial Accounting Exercises

Topics: 2008, 1921, Depreciation, Expense / Pages: 2 (251 words) / Published: Jan 5th, 2014
managerial accounting 9th edition,Ronald 03. Sadler Corporation purchased equipment to be used in manufacturing. The purchase was made at the beginning of 2006 by paying cash of $150 000. The equipment has an estimated residual value of 10,000 and an expected useful life of 10 years. At the beginning of 2008, Sadler concluded that the total useful life of the equipment will be 8 years rather than 10, and that the residual value will be zero. Sadler uses the straight-line method for depreciation. Required:
(a) Make the journal entry to record depreciation on the equipment for 2007.
(b) Make the journal entry to record depreciation on the equipment for 2008, including the effect of the changes in estimates.
(c) Describe how a business should account for a change in the estimated useful life and/or residual value of a depreciable asset.

Q2: 5MARKS
On 1 January 2006, Mission Company agreed to buy some equipment from Anna Company. Mission signed a note, agreeing to pay Anna $500 000 for the equipment on 31 December 2008. The market rate of interest for this note was 10%. (Rounded to the nearest dollar) Required:
(a) Prepare the journal entry Mission would record on 1 January 2006 related to this purchase.
(b) Prepare the 31 December 2006, adjusting entry to record interest expense related to the note for the first year.
(c) Prepare the 31 December 2008, adjusting entry to record interest expense related to the note for the second year.
(d) Prepare the entry Mission would record on 31 December 2008, the due date of the note to record interest expense for the third year and payment of the note.

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