Reference no: EM132462069

Question 1. Pemberton Company purchases a machine costing 375,000 and it has an estimated useful life of 7 years. The estimated residual value is 18,500.

Years             Units

1                  930,000

2                 800,000

3                 580,000

4                 500,000

5                 415,000

6                 300,000

7                 195,000

                 3,720,000

Problem a) What will be each year's depreciation charge if Pemberton uses the units of production method to calculate depreciation?

Problem b) Calculate Depreciation expense using the straight-line method.

Problem c) Calculate depreciation expense using the double-declining balance method

Problem d) Why might a manager choose an accelerated deprecation method over straight-line?

Question 2. The Mr. Plow, a snow removal company, had the following transactions in January.

1. Parts for snowplows were received and used in January and costed $1,500

2. Service revenue for the month was 25,000 but only $21,000 was cash sales the rest were sold on account. Typically 97% of sales on account were realized.

3. Interest on a loans outstanding were $900.

4. Wage costs for the month were 8,000

5. Parts inventory from the beginning of the month was depleted by 1,900.

6. Utility bills totaling 1200 were paid. 500 were associated with December operations.

7. Depreciation expense was 2,000

8. Selling and Marketing expense were 1750.

9. A provision for income taxes was made in the amount of 2700, of this provision 2000 was already been paid to the government

10. Admin and other expenses totaled 4300

Problem : Make an income statement for January.