Question

40In 2020, Nike discovered that equipment purchased on January 1, 2019, for $63,000 was expensed at that time. The equipment should have been depreciated over 6 years using the straight-line method, with a $6,600 value. The effective tax rate is 40%.
When preparing the 2020 correcting entry, Retained Earnings would be credited by what amount?

Select one:
a. $63,000
b. $9,400
c. $21,440
d. $32,160

47For leases accounted for as operating leases
Select one:
a. the lessee continues to use the effective-interest method for amortizing the lease liability.
b. the lessee continues to use its preferred method for amortizing the right-to-use asset.
c. at the end of each period, the lessee reports the net amount of the lease liability and the right-to-use asset (either as an asset or a liability) on its balance sheet.
d. the lessee is required to use the straight-line method for amortizing the right-to-use asset.

Answer 1

Q 40. Retained earning should be credited for 2020 is amouted to

Answer - d. $ 32160.

equipment purchased on 1st january,2019 =$ 63000.

Useful life = 6 years,salvage value of equipments = $ 6600.

Tax rate 40%

Depriciation per annum =equipment value - salvage value / useful life.

Depriciation = $ 63000 - $ 6600 / 6 years

= $ 9400 per annum.

Retained earnings for 2020 = value of equipments - depriciation - tax .

= $ 63000 - $ 9400 - ( 40% * $ 63000- $ 9400)

= $ 53600 - $ 21440

= $ 32160.

answered by: anonymous