1) Dougan Company purchased equipment on January 1, 2013 for $90,000. It is
estimated that the equipment will have a $5,000 salvage value at the end of its 5-year
useful life. It is also estimated that the equipment will produce 100,000 units over its
5-year life.
Instructions
Answer the following independent questions.
1>Compute the amount of depreciation expense for the year ended December 31, 2013,
using the straight-line method of depreciation.
2>If 16,000 units of product are produced in 2013 and 24,000 units are produced in
2014, what is the book value of the equipment at December 31, 2014? The company
uses the units-of-activity depreciation method.
3>If the company uses the double-declining-balance method of depreciation, what is
the balance of the Accumulated DepreciationEquipment account at December 31, 2015?
2) The entire group of accounts and their balances maintained by a company is called
the ________________.
3) Ford Co. uses a periodic inventory system. Its records show the following for the
month of May, in which 75 units were sold.
UnitsUnit CostTotal Cost
May 1 Inventory35$ 8$ 280
15 Purchases3012360
24 Purchases 4013 520
Totals105$1,160
Instructions
Compute the ending inventory at May 31 and cost of goods sold using the FIFO and
LIFO methods. Prove the amount allocated to cost of goods sold under each method.
4) Wando Company reported retained earnings at December 31, 2013, of $410,000.
Wando had 160,000 shares of common stock outstanding throughout 2014
The following transactions occurred during 2014
1>An error was discovered in the 2012 accounting records, depreciation expense was
recorded at $60,000, but the correct amount was $50,000
2>A cash dividend of $0.50 per share was declared and paid.
3>A 5% stock dividend was declared and distributed when the market price per share
was $15 per share.
4>Net income was $225,000
Instructions
Prepare a retained earnings statement for 2014 .
5) In general, costs ____________________ directly by the level of responsibility are
_______________, whereas costs that are ____________________ to the responsibility
level are __________________.
6) A CVP income statement is frequently prepared for internal use by management.
Describe the features of the CVP income statement that make it more useful for
management decision-making than the traditional income statement that is prepared for
external users.
7) On January 1, 2014, Maris Enterprises issued 9%, 5-year bonds with a face amount
of $800,000 at par. Interest is payable semiannually on June 30 and December 31 .
Instructions
Prepare the entries to record the issuance of the bonds and the first semiannual interest
payment.