Question 4

A machine was acquired on January 1, 2015, at a cost of $80,000.The machine was originally estimated to have a residual value of$5,000 and an estimated life of 5 years. The machine is expected toproduce a total of 100,000 components during its life, as follows:15,000 in 2015, 20,000 in 2016, 20,000 in 2017, 30,000 in 2018, and15,000 in 2019.

Instructions

(a)   Calculate the amount of depreciation to becharged each year, using each of the following methods:

       1.   Straight-line method

       2.   Units-of-production

       3.    Doublediminishing-balance

(b)   Which method results in the highest depreciationexpense during the first two years? Over all five years?

Question 5

Certossi Service Ltd. uses straight-line depreciation. Thecompany's fiscal year end is December 31. The followingtransactions and events occurred during their first three years ofoperations:

2014    Jul      1          Purchasedequipment for $32,000 cash, with shipping costs of $2,000.

           Nov    3          Incurredordinary repairs on the computer of $360.

           Dec    31        Recorded 2014depreciation on the basis of a four-year life and estimatedresidual value of $200.

2015    Dec    31        Recorded 2015depreciation.

2016    Jan     1          Paid $1,600for a major upgrade of the equipment. This expenditure is expectedto increase the operating efficiency and capacity of theequipment.

Instructions

Prepare journal entries to record the above events. (Showcalculations.)

Question 6

Comparative statements of financial position for Campbell Inc.appear below:

CAMPBELL INC.

Comparative Statements of Financial Position

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Assets

                                                                                              Dec. 31, 2016 Dec. 31, 2015

Cash                                                                                      $ 29,000        $15,000

Accountsreceivable                                                                28,000         19,000

Prepaidexpenses                                                                      9,000         12,000

Merchandiseinventory                                                            37,000         27,000

Long-terminvestments                                                            35,000         53,000

Equipment                                                                                75,000         48,000

Accumulateddepreciation—equipment                                 (26,000)       (22,000)

Totalassets                                                                           $187,000        $152,000

Liabilities and Shareholders' Equity

Accountspayable                                                                 $ 21,000         $9,000

Mortgagepayable                                                                    37,000         45,000

Commonshares                                                                      40,000         23,000

Retainedearnings                                                                    89,000        75,000

           Total liabilities and shareholders'equity                   $187,000        $152,000

Additional information regarding fiscal 2016:

1.         Profit forthe year was $27,000.

2.         Cash dividends of$13,000 were declared and paid during the year.

3.         Long-terminvestments with a carrying amount of $53,000 were sold for $48,000cash.

Instructions

Using the indirect method, prepare a statement of cash flows forthe year ended December 31, 2016.