Question 2 (20 Marks) On Jan 3, 2017, Limestone Enterprises purchased equipment for $134,500. The equipment has a useful life of five years or of 15,000 working hours and after the useful life it will have a residual value of $12,000. The machine was used for 1,400 hours in 2017, 2,100 hours in 2018; 3,700 hours in 2019. Required: 1. Calculate the depreciation expense for 2017 and 2018 under each of the following methods: (15 marks) i. Straight-line, ii. Double diminishing-balance, and iii. Units-of-production 2. Record the journal entry for depreciation expense for the year ended December 31, 2017 under the straight-line method. (2 marks) 3. Which method results in the lowest profit for the first two years? Why? (3 marks) Question 3 (20 Marks) a) Prudence Corporation purchased a machine for $280,000 on October 1, 2019, by paying 30% down payment in cash and for the balance amount signed a 5%, 9-month note payable for the balance amount. Interest and principle will be paid back together at the end of the note. Prepare journal entries to record: (14 Marks) i. the purchase of the delivery truck, ii. the adjusting journal entry to record the accrued interest on December 31, iii. and the payment of the note at maturity along with the interest. b) On January 1, 2019, Prudence Corp. issued $220,000 face value, 5-year bonds, with a coupon rate of 6%. Coupon is paid semi-annually on June 30 and December 31 each year. Prepare the necessary journal entries to record the: (6 marks) i) issuance of the bonds on Jan 1, 2019 ii) payment of first coupon payment on June 30, 2019. Question 2 (20 Marks) On Jan 3, 2017, Limestone Enterprises purchased equipment for $134,500. The equipment has a useful life of five years or of 15,000 working hours and after the useful life it will have a residual value of $12,000. The machine was used for 1,400 hours in 2017, 2,100 hours in 2018; 3,700 hours in 2019. Required: 1. Calculate the depreciation expense for 2017 and 2018 under each of the following methods: (15 marks) i. Straight-line, ii. Double diminishing-balance, and iii. Units-of-production 2. Record the journal entry for depreciation expense for the year ended December 31, 2017 under the straight-line method. (2 marks) 3. Which method results in the lowest profit for the first two years? Why? (3 marks) Question 3 (20 Marks) a) Prudence Corporation purchased a machine for $280,000 on October 1, 2019, by paying 30% down payment in cash and for the balance amount signed a 5%, 9-month note payable for the balance amount. Interest and principle will be paid back together at the end of the note. Prepare journal entries to record: (14 Marks) i. the purchase of the delivery truck, ii. the adjusting journal entry to record the accrued interest on December 31, iii. and the payment of the note at maturity along with the interest. b) On January 1, 2019, Prudence Corp. issued $220,000 face value, 5-year bonds, with a coupon rate of 6%. Coupon is paid semi-annually on June 30 and December 31 each year. Prepare the necessary journal entries to record the: (6 marks) i) issuance of the bonds on Jan 1, 2019 ii) payment of first coupon payment on June 30, 2019
