Question

- Diamonds & Pearls Mining Company buys new drilling equipment for $800,000. This equipment is estimated...

- Diamonds & Pearls Mining Company buys new drilling equipment for $800,000. This equipment is estimated to have a useful life of 15 years and a salvage value of $50,000. Diamonds & Pearls expect this equipment to be able to drill through 600,000 feet of rock. The equipment was purchased on January 1, 2018, and the company’s fiscal year-end is December 31st.

Assume the equipment was used to drill through 60,000 feet of rock during 2018. Using the activity-based method, what is the depreciation expense for 2018?

  1. $53,333

  2. $75,000

  3. $113,333

  4. $106,667

- Diamonds & Pearls Mining Company buys new drilling equipment for $800,000. This equipment is estimated to have a useful life of 15 years and a salvage value of $50,000. Diamonds & Pearls expect this equipment to be able to drill through 600,000 feet of rock. The equipment was purchased on January 1, 2018, and the company’s fiscal year-end is December 31st.

Using the straight-line method of depreciation, what is the depreciation expense for 2018?

  1. $56,667

  2. $50,000

  3. $53,333

  4. $106,667

- Diamonds & Pearls Mining Company buys new drilling equipment for $800,000. This equipment is estimated to have a useful life of 15 years and a salvage value of $50,000. Diamonds & Pearls expects this equipment to be able to drill through 600,000 feet of rock. The equipment was purchased on January 1, 2018, and the company’s fiscal year end is December 31st.

Using the double-declining balance method, what is the depreciation expense for 2018? (Round your answer to the nearest dollar).

  1. $53,333

  2. $106,667

  3. $50,000

  4. $100,000

- Terrific Tubers Potato Farm needs cash until it sells and delivers its potato crop. Spud National Bank extends a $300,000, 6% loan to Terrific Tubers on December 1, 2018, for which Terrific Tubers signs a note payable. The loan agreement states that all principal and interest will be repaid on March 31, 2019. Terrific Tuber’s fiscal year ends on December 31.

Select the journal entry to record the note payable on December 1, 2018 for Terrific Tuber.

  1. Debit Cash $318,000

         Credit Notes Payable $318,000

  1. Debit Notes Payable $300,000

         Credit Cash $300,000

  1. Debit Cash $300,000

         Credit Notes Receivable $300,000

  1. Debit Cash $300,000

         Credit Notes Payable $300,000

- Terrific Tubers Potato Farm needs cash until it sells and delivers its potato crop. Spud National Bank extends a $300,000, 6% loan to Terrific Tubers on December 1, 2018, for which Terrific Tubers signs a note payable. The loan agreement states that all principal and interest will be repaid on March 31, 2019. Terrific Tuber’s fiscal year ends on December 31.

Select the correct journal entry to record the payment of the note payable on March 31, 2019.

  1. Debit Notes Payable $300,000

Debit Interest Payable $1,500

Debit Interest Expense $4,500

         Credit Cash $306,000

  1. Debit Notes Payable $300,000

         Credit Cash $300,000

  1. Debit Cash $306,000

Debit Interest Expense $4,500

         Credit Interest Payable $10,500

         Credit Notes Payable $300,000

  1. Debit Notes Payable $300,000

Debit Interest Payable $1,500

         Credit Interest Expense $4,500

         Credit Cash $297,000

- Terrific Tubers Potato Farm needs cash until it sells and delivers its potato crop. Spud National Bank extends a $300,000, 6% loan to Terrific Tubers on December 1, 2018, for which Terrific Tubers signs a note payable. The loan agreement states that all principal and interest will be repaid on March 31, 2019. Terrific Tuber’s fiscal year ends on December 31.

Select the correct adjusting journal entry required on December 31, 2018, when financial statements are prepared.

  1. Debit Interest Payable $1,500

Credit Interest Expense $1,500

  1. Debit Interest Expense $1,500

Credit Interest Payable $1,500

  1. Debit Interest Expense $18,000

Credit Interest Payable $18,000

  1. Debit Interest Expense $1,500

Credit Cash $1,500

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Homework Answers

Answer #1

1

The answer is 75000

Total units = 600000

in First year = 60000

Depreciation Base = 800000 - 50000 = 750000

Then Depreciation rate = 750000 / 600000 = 1.25

Then Expense will be - 1.25 x 60000 = 75000

2

Answer is 50000

Depreciation Base = 750000

Use Ful Life = 15

Then Yearly Depreciation will be = 750000 / 15 = 50000

3

The answer 106667

The depreciation Rate will double the straight line rate = 100/ 15 = 6.67. In DDB will be 13.33333

The depreciation Expense will be 800000 x 13.33333% = 106667

4

The answer is

Cash A/c Dr 300000

Notes Payable Ac 300000

5

Answer is

Debit Notes Payable $300,000

Debit Interest Payable $1,500

Debit Interest Expense $4,500

         Credit Cash $306,000

Interest = 300000 x 6% x 4/12 = 6000

In december 31 we will adjust 1500 as payable . when making payment it will adjust

MOnthly interest = 6000 / 4

6

  1. Debit Interest Expense $1,500

Credit Interest Payable $1,500

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