Mgmt_200_Spring_2007_Exam_3_solution(3,25)

Mgmt_200_Spring_2007_Exam_3_solution(3,25) - Name: _ PUID:...

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Name: ________________________ PUID: ________________________ Purdue University Krannert School of Management MGMT 200 – Introductory Financial Accounting Spring 2007 Exam 3 – April 2, 2007 - SOLUTION This exam consists of 4 questions on 8 pages (excluding this cover page and the present value table page = 10 pages total) for a total of 100 points. Time allowed: 90 minutes. Answer all questions. To ensure full credit and to maximize partial credit, clearly show all supporting calculations. The exam is closed book. A calculator is permitted. Present value tables are provided on the last page. GOOD LUCK . Question 1 (25 points) ________ Question 2 (25 points) ________ Question 3 (25 points) ________ Question 4 (25 points) ________ TOTAL (100 points) ________
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West Baden City Corporation purchased a new trash truck on January 1, 2004. The truck cost $864,000. West Baden paid $164,000 cash and signed a five-year 7% note for the balance. At the time of purchase the truck was estimated to have a useful life of 9 years and an estimated resale value at the end of year 9 of $9,000. The trash truck will be used to collect trash from households in the city and is estimated to travel 57,000 miles during its 9 year life. Required: a. Prepare the journal entry to record the purchase of the truck on January 1, 2004. Truck 864,000 Cash 164,000 Note Payable 700,000 b. Prepare the journal entry to record depreciation expense for 2004 assuming West Baden City Corporation elects to depreciate the machine using the straight-line method. Depreciation expense 95,000 Accumulated depreciation 95,000 [864,000 – 9,000] / 9 years = 95,000 per year c. Prepare the journal entry to record depreciation expense for 2004 assuming West Baden City Corporation elects to depreciate the machine using the double declining- balance method. Depreciation expense 192,000 Accumulated depreciation 192,000 [864,000 – 0] x 2/9 = 192,000 Question 1 continued over . . . Mgmt 200 – Exam 3 Solution – Spring 2007 – page 1
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This note was uploaded on 11/22/2009 for the course MGMT 200 taught by Professor Greigg during the Spring '08 term at Purdue University-West Lafayette.

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Mgmt_200_Spring_2007_Exam_3_solution(3,25) - Name: _ PUID:...

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