1 On January 2, 2008 Opko Printing Company purchased a new printing press for $80,000 with an estimated residual value of $8,000. It depreciates the press over a five year period using the declining balance method of depreciation. (20 points) a Prepare the depreciation schedule for all five years. b Make the journal entry to record depreciation expense at the end of year 5 2 Stevenson Company purchased equipment for $250,000 on January 1, 2010. The estimated salvage value is $50,000, and the estimated useful life 5 years. The straight-line method is used for deprecialotion. On July 1, 2014, Stevenson sold the equipment for $100,000 (20 points) a Calculate the gain (loss) on the sale 1 of 5 b Make the journal entry to record sale of the equipment on July 1, 2013 3 on January 1, 2012 Everhart Corporation, a calendar year company, issues $100,000,5%. 5 year bonds dated January 1, 2012. The bonds pay interest semiannually January 1 and June 30. The bonds are issued to yield 6%. (35 points) 2.50% 3.00% 5.00% 6.00% Present Value of $1 for 5 periods 0.883850 0.862610 0.783530 0.747260 0.744090 0.613910 0.558390 4.579710 4.329480 4.421236 Present Value of $1 for 10 periods 0.781200 Present Value of Ordinary Annuity of $1 for 5 periods 4.464583 Present Value of Ordinary Annuity of $1 for 10 periods 8.752060 Required a Calculate the issue price of bond in dollars 8.530200 7.721730 7.360090 3 b Calculate the issue price of the bonds as a percentage c Prepare the journal entry to record the issuance (sale) of bond d Prepare the amortization table (effective interest method) for 2012, 2013 and 2014 e Prepare All necessary journal entries for 2013 4 Using the information from Question #3, assume that 50% of the bonds were retired on July 1, 2014 at 90. (15 points) a Calculate the gain (loss) on the retirement Make the journal entry to record the bond retirement on July 1, 2014 3 of 5 5 Gibbs Manufacturing Co. purchased a piece of land to build a new factory. The factory building was completed on August 1, 2012. Below is a list of costs incurred with the respective dates. (10 points) Date Item Amount $ 1/31/2012 2/28/2012 4/1/2012 5/1/2012 5/1/2012 8/1/2012 8/1/2012 12/31/2012 Land and an old dilapidated building Cost of removing old building Legal fees (See below) Fire insurance premium payment (See below) Partial payment of new building construction Final payment on building construction General expenses (See below) Asset write-up 240,000 4,000 3,500 5,400 170,000 170,000 30,000 75,000 $ 697,900 Additional information 1 To acquire the land and building on January 1, 2012, the company paid $240,000 cash. 2 When the building was removed, Gibbs paid Kwik Demolition Co $4,000, but also received $1,500 from the sale of salvaged materials 3 Legal fees covered the following: Examination of title covering the purchase of land $ Legal work in connection with the building construction 2,000 1,500 $ 3,500 a 4 The fire insurance premium covered premiums for a three year term beginning May 1, 2012 5 General expenses covered for the for the period January 1, 2012 through August 1, 2012 CEO's salary Plant superintendent covering supervision of the building $ 20,000 10,000 $ 30,000 6 Because of the rising land costs, the president was sure that the land was worth at least $75,000 more than what it cost the company. SEE INSTRUCTIONS ON NEXT PAGE Instructions Determine the proper balances as of December 31, 2012 for a separate land account and a separate building account. Use separate Taccounts fone for land and one for buildings) labeling all the relevant amounts and disclosing all computations. Sof 5