P1) Short Company purchased land by paying $21,000 cash on the purchase date and

Question

P1) Short Company purchased land by paying $21,000 cash on the purchase date and agreeing to pay $21,000 for each of the next six years beginning one-year from the purchase date. Short's incremental borrowing rate is 9%. On the balance sheet as of the purchase date, after the initial $21,000 payment was made, the liability reported is closest to

a) 126,000

b) 94,204

c) 155,204

d) 75,130

P2) Schager Company purchased a computer system on January 1, 2014, at a cash cost of $27,200. The estimated useful life is 10 years, and the estimated residual value is $4,100. The company will use the double declining-balance depreciation method. How much is the 2015 depreciation expense?

A) 4,352

B) 3,696

C) 4,620

D) 5,440

Explanation / Answer

P1 a) 126,000 Statement showing computations Particulars Amount Amount of each instalment            21,000.00 No of Years                       6.00 Total Amount of loan            126,000.00 P2    A) 4,352 Life   10 Years Cost of computer system            27,200.00 Double decling balance method rate = 10%*2 20% Particulars 2014 2015 Opening Balance            27,200.00          21,760.00 Depreciation@20%               5,440.00            4,352.00 Closing balance            21,760.00          17,408.00

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