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Equipment reported in the December 31, 2019, balance sheet was purchased in January 2019. It is being depreciated over eight years under the straight-line method
- Equipment reported in the December 31, 2019, balance sheet was purchased in January 2019. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $38,400; February, $91,200; and March, $24,000. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full months depreciation is taken for the month in which equipment is purchased.
- The company plans to buy land at the end of March at a cost of $150,000, which will be paid with cash on the last day of the month.
- The company has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $52,000 at the end of each month.
- The income tax rate for the company is 41%. Income taxes on the first quarters income will not be paid until April 15.
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