-Depreciation Methods.
JANUARY 1, ,1993 the Cascade Company purchased for $675,000 snow-making equipment having an estimated useful life of 6 years with an estimated salvage value of $45,000. Depreciation is taken for the portion of the year the asset is used.
Instructions
(a)
Complete the form below by determining the depreciation expense and year-end book values for 1993 and 1994 using the
1. sum-of-the-years'-digits method.
2. double-declining balance method.
Sum-of-the-Years'-Digits Method                1993       1994
Equipment                                                 $675,000 $675,000
Less: Accumulated Depreciation
Year-End Book Value
Depreciation Expense for the Year

Double-Declining Balance. Method
Equipment                                              $675,000    $675,000
Less: Accumulated Depreciation
Year-End Book Value
Depreciation Expense for the Year

(b)
Assume the company had used straight-line depreciation during 1993 and 1994. During 1995, the company determined that the equipment would be useful to the company for only two more years beyond 1995. Salvage .value is still estimated at $45,000. Compute below the amount of depreciation expense for the 1995 income statement.

II.
Capitalizing acquisition costs.
Gibbs Manufacturing Co. was incorporated on 1/2/10 but was unable to begin manufacturing activities until 8/1/10 because new factory facilities were not completed until that date. The Land and Building account at 12/31/10 per the books was as follows:
Date             Item                                                          Amount
1/31/10       Land and dilapidated building                      $200,000
2/28/10       Cost of removing building                            4,000
4/1/10          Legal fees                                                       6,000
5/1/10          Fire insurance premium payment                5,400
5/1/10          Special tax assessment for streets                4,500
5/1/10          Partial payment of new building construction 150,000
8/1/10          Final payment on building construction          150,000
8/1/10          General expenses                                              30,000
12/31/10    Asset write-up                                                    75,000
                                                                                                $624,900
Additional information:
1. To acquire the land and building on 1/31/10, the company paid $100,000 cash and 1,000 shares of its common stock (par value = $100/share) which is very actively traded and had a market value per share of $170.
2. When the old building was removed, Gibbs paid Kwik Demolition Co. $4,000, but also received $1,500 from the sale of salvaged material.
3. Legal fees covered the following:
Cost of organization                                                                $2,500
Examination of title covering purchase of land                   2,000
Legal work in connection with the building construction    1,500
                                                                                                $6,000
4. The fire insurance premium covered premiums for a three-year term beginning May 1, 2010.
5. General expenses covered the following for the period 1/2/10 to 8/1/10.
President's salary                                                                         $20,000
Plant superintendent covering supervision of new`building 10,000
                                                                                                   $30,000
6. Because of the rising land costs, the president was sure that the land was worth at least $75,000 more than what it cost the company.
Instructions
Determine the proper balances as of 12/31/10 for a separate land account and a separate building account. Use separate T-accounts (one for land and one for building) labeling all the relevant amounts and disclosing all computations.

III.
Payroll entries.
Total payroll of Watson Co. was $1,840,000, of which $320,000 represented amounts paid in excess of $106,800 to certain employees. The amount paid to employees in excess of $7,000 was $1,440,000. Income taxes withheld were $450,000. The state unemployment tax is 1.2%, the federal unemployment tax is .8%, and the F.I.C.A. tax is 7.65% on an employee's salaries and wages to $106,800 and 1.45% in excess of $106,800.
Instructions
(a) Prepare the journal entry for the salaries and wages paid.
(b) Prepare the entry to record the employer payroll taxes.

IV.
Stine Co. is a retail store operating in a state with a 6% retail sales tax. The retailer may keep 2% of the sales tax collected. Stine Co. records the sales tax in the Sales account. The amount recorded in the Sales account during May was $148,400.
The amount of sales taxes (to the nearest dollar) for May is
a. $8,726.
b. $8,400.
C. $8,904.
d. $9,438.
The amount of sales taxes payable (to the nearest dollar) to the state for the month of May is
a. $8,551.
b. $8,232.
C. $8,726.
d. $9,249.

V
Bond issue price
On January 1, 2013, Piper Co. issued ten-year bonds with a face value of $4,000,000 and a stated interest rate of 10%, payable semiannually on June 30 and December 31. The bonds were sold to yield 12%. Table values are:
Present value of 1 for 10 periods at 10%          .386
Present value of 1 for 10 periods at 12%          .322
Present value of 1 for 20 periods at 5%             .377
Present value of 1 for 20 periods at 6%             .312
Present value of annuity for 10 periods at 10% 6.145
Present value of annuity for 10 periods at 12% 5.650
Present value of annuity for 20 periods at 5%    12.462
Present value of annuity for 20 periods at 6%    11.470
Instructions
Calculate the issue price of the bonds.

VI
Bonds Issued between Interest Dates
On April 1, 2001 Penny issued $600,000, 9% bonds for $645,442 including accrued interest. Interest is payable annually on January 1, and the bonds mature on January 1, 2011.
Prepare the journal entry to record the issue of the bonds on April 1, 2001.

-Depreciation Methods. JANUARY 1, ,1993 the Cascade Company purcha...