1. Ricky Corporation purchased equipment on January 1, 2016 for $168,109. It is estimated that the equipment will have a $14,000 residual value at the end of its 8-year

useful life. It is also estimated that the equipment will produce 110,000 units over its 8year life. Round the rate per unit to two decimals.

On December 31, 2018, Ricky sells the equipment for $85,000. Ricky produced 20,000 units in 2016, 24,000 units in 2017 and 22,000 units in 2018.

Instructions

(a) Determine the carrying amount of the equipment at December 31, 2018 using the units-of-production method of depreciation.

(b) Prepare the appropriate journal entry for the sale of the equipment.

2. Proctec Trust Inc. issued $100,000, 5 year bond on January 1, 2018 paying 4% interest on a semi-annual basis every January 1 and July 1.

Instructions

Using a financial calculator, or tables on pg. 550 551(students can also use pre-built excel formulas if they are expert users of excel program) prepare the first year journal

entries for the bond issue and interest expense assuming that the company uses the effective interest method, a market interest rate of 6% and has a year-end of December

31, 2018.

3. On January 1, 2018, Fort Industrial Corp. issued bonds with a face value of $1,000,000. The bonds have a coupon interest rate of 5%, payable each July 1 and

January 1.

Instructions

(a) Prepare the journal entry for the issue, assuming the bonds are issued at 98.5.

(b) Prepare the journal entry for the issue, assuming the bonds are issued at 104.5