Mohr Company purchases a machine at the beginning of the year at a cost of $29,0

Question

Mohr Company purchases a machine at the beginning of the year at a cost of $29,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 5 years with a $7,000 salvage value. The machine’s book value at the end of year 2 is:

Multiple Choice

$10,440.

$11,600.

$10,000.

$13,200.

$17,400.

Cox, North, and Lee form a partnership. Cox contributes $177,000, North contributes $147,500, and Lee contributes $265,500. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $174,000 for its first year, what amount of income is credited to Cox's capital account? (Do not round your intermediate calculations.)

Multiple Choice

$59,700.

$52,200.

$78,300.

$58,000.

$43,500.

Explanation / Answer

1) Straight line dep = 100/5 = 20%

Double decline dep = 20*2 = 40%

First year dep = 29000*40% = 11600

Second year dep = (29000*60%*40%) = 6960

Book value at the end of 2nd year = 29000-11600-6960 = 10440

so answer is a) 10440

2) Partnership income distribution :

Cox = 174000*177000/590000 = 52200

North = 174000*147500/590000 = 43500

Lee = 174000*265500/590000 = 78300

so answer is b) $52,200

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