E. Depreciation A machine was purchased on July 1, 2010 for $65,000. It has a 5

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E. Depreciation A machine was purchased on July 1, 2010 for $65,000. It has a 5 year life and a $5,000 salvage value for financial reporting purposes. Straight line depreciation will be used for financial reporting purposes. DDBx with a zero salvage value will be used for tax purposes. Depreciation is taken to the nearest month. The company has a 2011 projected income of $100,000 before depreciation is deducted. The tax rate is 40%. 1. Calculate 2011 depreciation under both methods. 2. Make the entry to record taxes for 2011 III. Debt A. Missing Interest Bond Company issued a $100,000 zero interest bond on January 1, 2009 for $70,000. The bond matures in 10 years. On April 1, 2011, All of the bonds were retired for $78,000 1. Calculate the effective interest rate. Show your calculator inputs. 2. Prepare an amortization schedule covering 2009, 2010 and 2011. 3. Prepare the entry to retire the bonds on April 1, 2011. Don’t ignore interest expense for the partial period. B. Serial Bonds On January 1, 2009, Rice issued $300,000 of serial bonds. The stated, nominal interest rate is 6% annual. Interest is paid each December 31. The bonds mature in $100,000 amounts beginning December 31, 2009. The legal schedule of payments is as follows: Date Interest Principal Balance Jan. 1, 2009 300,000 Dec. 31, 2009 18,000 100,000 200,000 Dec. 31, 2010 12,000 100,000 100,000 Dec. 31, 2011 6,000 100,000 0 1. The bonds sold to yield an effective interest rate of 6.25% annual. Calculate the sales price of the bond issue. 2. Prepare an amortization table for 2009 Date Cash Payment Effective Interest Principal Balance Jan. 1, 2009 Dec. 31, 2009 3. Record the entry to be made on December 31, 2009 to make the required annual payment

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E. Depreciation A machine was purchased on July 1, 2010 for $65,000. It has a 5

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