BU 101 (60 Points) 1. Please provide journal entries for the following transactions related to Notes Receivable for XYZ Co. The company records an adjusting journal entry for accrued Interest Revenue once a year at 12/31. 2/1 Provided $7,500 of service to A Co. and accepted a 6-month 5% note. 3/1 Loaned Employee T $2,500 and accepted a 3-month 4% note. 6/1 8/1 10/1 Note from Employee T matured, they honor the note (we collect). The note from A Co. matured today, they default. Provided $5,000 of service to B Co. (2/10, n/30). 11/1 Accepted 3-month 3% note from B Co. (roll over A/R to N/R). 12/1 Loaned Employee Z $3,000 and accepted a 4-month 6% note. 12/31 Accrue interest revenue from Z, B, and A. Next Year 2/1 3/15 4/1 Note from B Co. matures today, they honor the note (we collect). Collect from A Co. Note from Employee Z matures today, they honor the note (we collect). (40 Points) 2. (A) Please prepare the depreciation schedules for both the Straight-Line and Double Declining Balance methods of depreciation based on the following: Purchased a machine at a cost of $33,500 on 1/1/1 (first year in business). The machine has an estimated salvage value of $1,500 and an 8-year useful life. (B) Please provide a side-by-side analysis of the tax impact for the first year of business using both the Straight-line and Double Declining Balance Methods. See information provided in the Excel File Tab # 3-P. 2 (B) P. 1 P. 2 (A) P. 2 (B) GENERAL JOURNAL Probleodes Receivable Transaction Jornal for XYZ Co, 12/31 31 Date Account Titles & Explanation Debit Credit 2/1 A.Co Account Receivable 7,500 Ce Service Revenue 7.500 2/1 5% Bills Receivables 7,500 A.co Account Receivable 7,500 3/1 Empoyee T 2.500 Cash 2.500 3/1 4% Notes And Loans 2.500 Employee T 2.500 6/1 Cash 2.525 Employee T 2,500 Interest Income 25 8/1 Bad Bebt Expense 7,500 Account Receivable 7.500 10/1 Account Receivable 5,000 Service Revenue 5,000 11/1 Account Receivable 5,000 B.co 5,000 12/1 Employee Z 3,000 Cash 3,000 12/31 Accrued Interest 520 Interest Income 520 12/31 Interest Income 520 Profit and Loss 520 Next Year 2/1 Cash 5,000 3% Notes Receivable 5,000 3/15 Cash 7,952 A.co 7.500 Interest Revenue 452 4/1 Cash 3,060 6% Notes Receivable Interest Revenue 3,000 60 GENERAL JOURNAL J2 Date Account Titles & Explanation Debit Credit P. 1 P. 2 (A) P. 2 (B) Depreciation Schedule Straight Line Problem 2 Book Value Year Computation Depreciation Accumulated Expense Depreciation 1 33,500 4,000 4,000 29,500 2 29,500 4,000 8,000 25,500 3 25,500 4,000 12,000 21,500 4 21,500 4,000 16,000 17,500 5 17,500 4,000 20,000 13,500 6 13,500 4,000 24,000 9,500 7 9,500 4,000 28,000 5,500 8 5,500 4,000 32,000 1,500 Depreciation Schedule Double Declining Balance Book Value Year Depreciation Accumulated Computation Expense Depreciation 1 33.500 8,375 8,375 25,125 2 25.125 6,281 14,656 18,844 3 18,844 4,711 19,367 14,133 4 14.133 3,533 22,900 10,600 5 10,600 2,650 25,550 7,950 6 7,950 1,987 27,538 5.962 7 5,962 1,491 29,028 4,472 8 4,472 1.118 30,146 3.354 (b) Use Next Tab P. 1 P. 2 (A) P. 2 (B) P2. Part B Depreciation Methods and the Impact on Income Taxes Income Tax savings when using DDB as opposed to S/L depreciation for Year 1 S/L Income before Deprec 45,000 DDB 45,000 Deprec Expense Taxable Income Tax Rate 30% x 30% x 30% Inc Tax Expense Net Income 1) Complete the schedule using the Depreciation Schedules for Straight-line and Double Declining Balance for Year 1 from part A 2) Provide a couple of sentences in support of using the DDB depreciation method as opposed to the S/L depreciation method. What is the benefit? How does it affect Inc Tax Expense and Net Income?