Reference no: EM132572895

Questions -

Q1. On Feb 1 2019, ABC Co. traded in an old piece of equipment that originally cost $32,000 with a salvage value of $2000 and a useful life of 5 years for a new upgraded model that had a cash price of $40,000. The company uses straight-line depreciation and the original equipment was purchased on Feb 1, 2015.

(A) Prepare the journal entry to record the exchange under the assumption that a $5,000 trade-in allowance was received and the balance was paid in cash.

(B) Prepare the journal entry to record the exchange under the assumption that instead of a $5,000 trade-in allowance, a $12,500 trade-in allowance was received and the balance was paid in cash.

Q2. XYZ Co. Purchased a delivery van on January 1, 2000 for $80,000. At the time of purchased it was estimated that the van would be used for 8 years with a $20,000 trade-in value. On January 1, 2004 the company decided to revise the useful life to 10 years and revise the residual value to $15,000. Using straight-line depreciation, determine the book value on January 1, 2004 and the revised depreciation for 2004.

Q3. Ben Conway, Ida Chan, and Clair Scott formed CCS Consulting this year by making capital contributions of $250,000, $400,000, and $150,000, respectively. They anticipate annual loss of $200,000 and are considering the following alternative plans of sharing profits and losses:

i. In the ratio of their initial investments; or

ii. Salary allowances of $100,000 to Conway, $90,000 to Chan, and $50,000 to Scott and interest allowances of 15% on initial investments, with any remaining balance shared in the ratio of 3:2:1.

Required -

1. Use the schedule to show how a loss of $200,000 would be distributed under each of the alternative plans being considered.

2. Prepare the December 31, 2020, journal entry to close Income Summary assuming they agree to use alternative (II).

Q4. A partnership was formed between 3 individuals; Ronald, Jim and Jennifer and their capital accounts of $500,000, $350,000 and $200,000 respectfully. The partners agreed to share profits/losses in the ratio of 75%, 15% and 10%. The existing partners admitted a new partner Rani by giving him 20% for $200,000.

Q5. Assume a corporation had 1,500, $15, preferred shares outstanding and 10,000 common shares. The corporation declared and paid dividends each year as shown below.

a) Calculate the total dividends distributed to each class of shares under each of the assumptions given.

b) What is the journal entry for the year 2021 if the dividends were declared on Dec 10, 2022 and the preferred shares were cumulative?