Unit 2 Activity 6

Write the account number where required

Knowledge and Understanding (10 marks)

1 The Paris Construction Company purchased a piece of machinery on January 01, 2020 for $63 000.

Freight costs came to $1200.

It cost $1 700 to install and test the machinery.

At this time, it was estimated that the machine would be used for six years and would have a residual value of $8 000 at that time

Before recording the 2020 amortization expense, the owners realized that this machinery would last only five years, and therefore revised the amortization expense calculation.

On July 2, 2023, the machine broke down and rather than repair it, the company decided to sell it for $24 000.

a) Prepare the journal entry to record the purchase of the machine

b) Calculate the amortization charges that would appear on the 2020- and 2021-income statements, using the straight-line method of amortization.

c) Show the journal entry for the 2020 amortization.

d) Show how the machine would appear in the ParisConstruction Company Balance Sheet on December 31, 2022, presuming the straight-line method of amortization is used.

e) Show the Journal entry for July 02 2023 after the disposal.

Inquiry and Thinking (5 marks)

2. Edson Mining Company

On March. 1, 2015, Edson Mining Company purchased a mine for $100 million that is estimated have 250 000 tonnes of ore and a residual value of $7 million. The cost of restoration at the end of the useful life is estimated at $12 million.

In 2015, 30 000 tonnes of ore were extracted.

a) Calculate the amount of deplation that should be recorded on December 31, 2015.

b) Calculate the amount of the restoration liability.

c) Show the journal entry for December 31, 2015.

Thinking and Inquiry (5 marks)

3. Fried Rice Restaurant

Journalize the following three transactions from their lunchtime crowd on August 01, 2023. The following service fees apply:

$0.15 per transaction for debit card;

2.5% for MasterCard and Visa;

3.5% for American Express.

a) A lunch bill for $34.00 was paid with a debit card.

b) A lunch bill for $25.00 was paid with a MasterCard.

c) A lunch bill for $55.00 was paid with an American Express

d) Total cash (notes and coins) received from sales was $ 260.

Communication (6 marks)

4 a) Why do companies choose to accept credit and debit cards as forms of payment? Outline the pros and cons of this business decision.

b) What factors must a company consider when choosing an amortization method to use for a fixed asset? Be sure to refer to GAAP and the effect of the decision on the financial statements.

5 Communication (4 marks)

2 On July 01 2022, Blue Mountain Ski Company purchased a new snow grooming machine for $ 62 000. The machine is estimated to have a 5-year useful life and a $ 8000. It is also estimated to have a total useful life of 6000 hours. It was used for 1000 hours in the year ended Dec 31 2022. Answer the following questions:

What is depreciation for the year ending Dec 31 2022 if the straight-line method is used? Show your workings

What is the depreciation for the year ending Dec 31 2022 if the double diminishing -balance is used? Show your workings.

Please type answers not handwritten