E9 7brainiac Company Purchased A Delivery Truck For 30,000

E9 7brainiac Company Purchased A Delivery Truck For 30000 On January

Evaluate multiple depreciation methods and journal entries for various transactions involving assets, bonds, and loans. Specifically, compute depreciation expenses using the straight-line, units-of-activity, and double-declining balance methods for a delivery truck; prepare relevant journal entries for bond issuance, interest payments, and amortizations; and create amortization schedules for mortgage notes and bonds. Additionally, calculate net pay for an employee, and prepare journal entries and balance sheet presentations related to financial liabilities.

Paper For Above instruction

The case of Brainiac Company purchasing a delivery truck for $30,000 on January 1, 2011, serves as a foundation for understanding depreciation methods. The truck’s expected salvage value is $2,000, with an estimated useful life of 8 years and an expected total mileage of 100,000 miles. Actual miles driven were 15,000 in 2011 and 12,000 in 2012. The depreciation expense for each year is calculated using three methods: the straight-line method, units-of-activity method, and double-declining balance method. Each method offers different approaches to allocating the asset’s cost over its useful life, providing insights into how depreciation impacts financial statements.

For the straight-line method, depreciation is evenly spread over the asset’s useful life, calculated as (Cost - Salvage Value) / Useful Life. Thus, annual depreciation is ($30,000 - $2,000) / 8 = $3,500. The depreciation expense for 2011 and 2012 remains consistent at $3,500 annually. The journal entry to record depreciation for 2011 reflects this expense, crediting accumulated depreciation and debiting depreciation expense.

The units-of-activity method allocates depreciation based on actual miles driven. The rate per mile is calculated as (Cost - Salvage Value) / Total expected miles, which equals ($30,000 - $2,000) / 100,000 = $0.28 per mile. For 2011, driving 15,000 miles results in a depreciation expense of 15,000 x $0.28 = $4,200; for 2012, 12,000 miles give a depreciation expense of 12,000 x $0.28 = $3,360.

The double-declining balance method accelerates depreciation. The rate is double the straight-line rate: 2 / 8 = 25%. The first year's depreciation is 25% of the book value: $30,000 x 25% = $7,500. The second year's depreciation is 25% of the new book value (after subtracting the previous depreciation): ($30,000 - $7,500) x 25% = $5,625. These values demonstrate how accelerated depreciation impacts early years more heavily.

Switching focus to the employee payroll scenario, Don Walls's gross earnings of $1,780, with federal income tax withholding of $301.63 and FICA total of $135.73, results in net pay calculated as gross earnings minus taxes and FICA contributions, approximately $1,342.64. The journal entry debits Salaries Expense and credits Salaries Payable for total gross earnings, with deductions credited to respective payable accounts, reflecting proper recording of wages payable.

For bond issuance, Neuer Company issued $500,000, 10%, 10-year bonds at par on January 1, with interest payable semiannually. The journal entry records the cash received and bonds payable. The subsequent interest payments and accruals involve debiting interest expense and crediting interest payable, reflecting the accrual of interest expense over periods. Similar entries apply to Flory Company’s bonds, adjusting for their 8% rate and terms.

Mortgage notes, like Leoni Co.’s $240,000, 10% note payable, involve recording cash received and subsequent installment payments. The entries reflect interest expense and reduction of principal, with amortization of the discount or premium based on the effective-interest method. Similarly, bonds issued at a discount or premium, such as Hrabik Corporation’s bonds, require amortization of premium or discount to adjust bond carrying amounts accurately.

Finally, detailed amortization schedules are prepared for mortgage loans, illustrating how interest expense and principal reduction vary over periods, affecting balance sheet presentation as current or long-term liabilities. These comprehensive, methodical processes exemplify sound accounting practices for long-term liabilities and asset management, ensuring accurate financial reporting across different scenarios.

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