On December 1, 2016, Half-Pint Company accepted a $24.000, 120 day, 8% note from

Question

On December 1, 2016, Half-Pint Company accepted a $24.000, 120 day, 8% note from a customer in granting an extension to a past due account. Half-Pint Company's accounting period ends on December 31. and the note is collected in full on the due date. Which one of the following statements will be false for Half Pint Company? Select one A. On March 31, 2017, they will credit Interest income for $480 B. On March 31, 2017, they will credit interest Receivable for $160 o c. on December 31, 2016. they will credit interest Receivable for $160 D. On March 31, 2017, they will credit Notes Receivable for $24.000

Explanation / Answer

1) credit for interest receivable of $ 160 (24,000 * 30/360 *8%)will be done on 31st december but not on 31st march. Therefore the answer B is false.

2) Under double declining method decpreciation will be 200% of Straight Line Method depreciation

depreciation under SLM = (320,000 - 20,000) / 8 = 37,500

depreciation rate under SLM = 37,500 / 300,000 = 12.5%

Depreciation under double declining method = 25%

Year 1 depreciation = 320,000 * 25% = 80,000

Year 2 depreciation = (320,000 - 80,000) * 25% = 60,000 option (C)

3) depreciation is recognised evenly over the useful life of asset (D)

4) Asset is said to be impaired if the net book value is greater than the sum of expected cash flows (A)

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