Question

14A. Martin Company purchases a machine at the beginning of the year at a cost of $135,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $11,250 salvage value. Depreciation expense in year 4 is:

14B. On January 1 of Year 1, Congo Express Airways issued $4,400,000 of 7%, bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,994,000 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized using the straight-line method at a rate of $14,500 every 6 months. The life of these bonds is:

Answer 1

14 A)	Rate= 1/4*2
	0.5
	50%
	Depreciation expense
	year 1	135000*50%=			67500
	year 2	(135000-67500)*50%			33750
	year 3	(67500-33750)*50%=			16875
	year 4	(16875-11250)=			5625	answer
	Depreciation for year 4 is $5,625
14 B)	total discount
	Face value				44,00,000
	less issue price				39,94,000
	total discount				4,06,000
	discount period=		406,000/14500
			28
			hence life of these bonds is 14 years