Reference no: EM133090690
Question 1 - Jazz Manufacturing Limited purchased a new piece of machinery on January 1, 2019 for $150,000. The machinery has a useful life of 5 years or 1,300,000 units and management estimates they will be able to sell it for $20,000 at the end of its useful life. The machinery produced 275,000 units in 2019, 280,000 units in 2020, 250,000 units in 2021 & 200,000 units in 2022.
Required -
1. Calculate the depreciation expense for 2019, 2020, 2021 & 2022 using
1. straight line method
2. Units of production method and
3. Double-declining balance method
2. Assume that Jazz Manufacturing sold the machinery on January 1, 2022 for $50,000. What is the gain or loss on the sale?
3. Prepare the journal entry to record the sale of the machinery on January 1, 2022.
Question 2 - The following information has been gathered to assist you in deciding whether to invest in Socks & Gizmo Limited.
Additional information:
Dividends declared & paid in 2021 $50,000
Number of shares outstanding at October 31, 2021 10,000
Market price per share at October 31, 2021 $ 20.00
Selected Data from the October 31, 2020 financial statements:
Accounts receivable, net 31,500
Inventory 44,000
Total assets 328,500
Accounts payable 32,600
Total shareholder's equity 167,200
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Industry averages - 2021
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Socks & Gizmo Limited 2020
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Gross profit margin ratio
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55.00%
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62.00%
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Return on sales (net profit margin)
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9%
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10.00%
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Return on total assets
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26%
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24%
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Debt ratio
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0.45
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0.4
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Current ratio
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1.5
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2
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Asset turnover
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2.1
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2
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Quick Ratio
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1
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1.1
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Earnings per share
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10
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5
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Dividend Yield
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0.3
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0.2
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Required -
1. Calculate 12 ratios for the year ended October 31, 2021 for Socks & Gizmo Limited using the ratio sheet provided in Moodle. You may calculate any 12 you wish.
2. Discuss 4 ratios calculated in part 1.
3. Based on the ratios you discussed in Part 2 would you be willing to invest in Socks & Gizmo Limited? Why or why not?