ACCT 212 Week 6 Homework

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Institution	ACCT 212 Financial Accounting
Contributor	Jessica Brown

Description

ACCT 212 Week Six Homework

Question: McCoy's Fish House purchases a tract of land and an existing building for $1,000,000. The company plans to remove the old building and construct a new restaurant on the site. In addition to the purchase price, McCoy pays closing costs, including title insurance of $3,000. The company also pays $14,000 in property taxes, which includes $9,000 of back taxes (unpaid taxes from previous years) paid by McCoy on behalf of the seller and $5,000 due for the current fiscal year after the purchase date. Shortly after closing, the company pays a contractor

$50,000 to tear down the old building and remove it from the site. McCoy is able to sell salvaged materials from the old building for $5,000 and pays an additional $11,000 to level the land.

Required:

a. Determine the amount McCoy’s Fish House should record as the cost of the land. (Amounts to be deducted should be indicated by a minus sign.)

2. Question:

Required:

Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)

Cost of the Machine $228,000

Question:

b. Double Decline Method

Annual Depreciation: 1/Life*2

Depreciation Rate: (1/6)*2 33% 0.3333333333333333

Book Value	Depreciation Expenses @ 33%	Accumulated Depreciation	Book Value
$228,000	$75,999	$75,999	$152,001
$152,001	$50,667	$126,666	$101,334
$101,334	$33,778	$160,444	$67,556
$67,556	$22,519	$182,963	$45,037
$45,037	$15,012	$197,975	$30,025
$30,025	$6,025	$204,000	24,000

Question:

Prepare a depreciation schedule for six years using the activity-based method. (Round your "Depreciation Rate" to 2 decimal places and use this amount in all subsequent calculations.) $228,000

Question:

Required:

Calculate Sub Station’s return on assets, profit margin, and asset turnover ratio. (Enter your answers in thousands of dollars. (i.e.

Question:

b. Calculate Planet Sub's return on assets, profit margin, and asset turnover ratio. (Enter your answers in thousands of dollars. (i.e. 123,000 should be entered as 123).)

Question:

a. Which company has the higher profit margin?

Sub Station

Which company has the higher asset turnover?

Planet Sub

Are the two ratios consistent with the primary business strategies of the two companies?

Yes

8. Question:

1 November 01, 2021 ($55,000 x 6% x 2 / 12) = $550

2 December 31, 2021 ($55,000 x 6% x 1 / 12) = $275

3 February 01, 2022 ($55,000 x 6% x 2 / 12) = $550

9. Question:

1 January 31 Salaries Expense (D) $1,400,000 Income Tax Payable (C) $297,500

FICA Tax Payable (C) $107,100

Accounts Payable (C) $14,000

Salaries Payable (C) $981,400 2 January 31 Salaries Expense (D) $42,000

Accounts Payable (C) $42,000 3 January 31 Payroll Tax Expense (D) $193,900

FICA Tax Payable (C) $107,100 Unemployment Tax Payable (C) $86,800

10. Question:

Face Value $40,900,000

Interest payment ($40,900,000 x 8% x 1/2year) = $1,636,000 Periods to maturity (15 years x 2 periods each year) = 30 Market interest rate (7%/2 periods each year) = 3.5

Issue Price = ($1,636,000 x 18.39205) + ($40,900,000 x 0.35628) = 44,661,245.80

Semiannual rate = Market rate / Semiannual periods

3.5 = 7 / 2

Question:If the market rate is 8%, calculate the issue price.

Face Value $40,900,000

Interest payment ($40,900,000 x 8% x 1/2year) = $1,636,000 Periods to maturity (15 years x 2 periods each year) = 30 Market interest rate (8%/2 periods each year) = 4

Issue Price = ($1,636,000 x 17.29203) + ($40,900,000 x 0.30832) = $40,900,049.08

Question: If the market rate is 9%, calculate the issue price.

Face Value $40,900,000

Interest payment ($40,900,000 x 8% x 1/2year) = $1,636,000 Periods to maturity (15 years x 2 periods each year) = 30 Market interest rate (9%/2 periods each year) = 4.5

ACCT 212 Week Six Homework Practice:

Question:

Fresh Veggies, Inc. (FVI), purchases land and a warehouse for

$490,000. In addition to the purchase price, FVI makes the following expenditures related to the acquisition: broker's commission, $29,000; title insurance, $1,900; and miscellaneous closing costs, $6,000. The warehouse is immediately demolished at a cost of $29,000 in anticipation of building a new warehouse.

a. Determine the amount FVI should record as the cost of the land.

$555,900

2. Question:

a. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)

Question: b. Double Decline Method

Annual Depreciation: 1/Life*2

Depreciation Rate: (1/6)*2 33% 0.3333333333333333

Book Value	Depreciation Expenses @ 33%	Accumulated Depreciation	Book Value
$270,000	$90,000	$90,000	$180,000
$180,000	$60,000	$150,000	$120,000
$120,000	$40,000	$190,000	$80,000
$80,000	$26,667	$216,667	$53,333
$53,333	$17,778	$234,445	$35,555
$35,555	11,555	246,000	24,000

Question: Prepare a depreciation schedule for six years using the activity-based method. (Round your "Depreciation Rate" to 2 decimal places and use this amount in all subsequent calculations.)

Year	Depreciation Expense	Accumulated Depreciation	Book Value
1	$63,550	$63,550	$206,450
2	$22,550	$86,100	$183,900
3	$24,600	$110,700	$159,300
4	$57,400	$168,100	$101,900
5	$53,300	$221,400	$48,600
6	$24,600	$246,000	$24,000
Total	$246,000

5. Question:

a. Calculate Sub Station’s return on assets, profit margin, and asset turnover ratio. (Enter your answers in thousands of dollars. (i.e. 123,000 should be entered as 123).)