ACCTSol92.pdf - 86 Award 1.00 point The Electric Company...

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86. Award: 1.00 point 87. Award: 1.00 point The Electric Company buys machinery for $500,000 and gives a promissory note to pay dated 2 years from the purchase date. Interest at 10% and principal are to be repaid at maturity. The life of the asset is also estimated to be two years with no salvage and straight line depreciation is used. The charge to earnings in year 2 resulting from this will be: $200,000 $250,000 $300,000 $350,000 None of the above The Electric Company buys machinery for $500,000 and gives a promissory note to pay dated 2 years from the purchase date. Interest at 10% and principal are to be repaid at maturity. The life of the asset is also estimated to be two years with no salvage and straight line depreciation is used. We can say that on the purchase date: The amount shown for the asset on the balance sheet will be the same as the amount shown for the liability The amount shown for the asset on the balance sheet will differ than the amount shown for the liability
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