Mgmt 200 Fall 2009 Exam Final Solution

# Mgmt 200 Fall 2009 Exam Final Solution - First name Last...

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First name: ___________ Last name: ______________ PUID: ________________________ Purdue University Krannert School of Management MGMT 200 – Introductory Financial Accounting Fall 2009 Final Exam – December 15, 2009 - SOLUTION This exam consists of 4 questions on 13 pages (excluding this cover page and the present value table page) 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. GOOD LUCK . Question 1 (20 points) ________ Question 2 (28 points) ________ Question 3 (22 points) ________ Question 4 (30 points) ________ TOTAL (100 points) ________

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Question 1: Property, Plant, and Equipment (20 points) On January 1, 2007 Juniper Manufacturing purchased equipment for \$960,000. The estimated useful life of the equipment is 5 years, and the estimated residual value at the end of five years is \$80,000. Juniper Manufacturing expects to run the equipment for a total of 17,600 hours during the five year period. Actual machine hours used in 2007 totaled 2,974. Actual machine hours used in 2008 totaled 3,965. Required: a. Calculate depreciation expense for both 2007 and 2008 assuming Juniper Manufacturing elects to use the straight-line depreciation method. 2007: ____ \$176,000 ______ 2008: ____ \$176,000 ______ (Cost – RV) / Economic life = depreciation expense (960,000 – 80,000)/5 = \$176,000 b. Calculate depreciation expense for both 2007 and 2008 assuming Juniper Manufacturing elects to use the units-of-production depreciation method. 2007: ____ \$148,700 ______ 2008: ____ \$198,250 ______ (Cost – RV) / total hours = depreciation expense per hour (960,000 – 80,000)/ 17,600 = \$50 per hour 2007: 50 x 2,974 = 148,700 2008: 50 x 3,965 = 198,250 Question 1 continued over . . . Mgmt 200 – Final Exam – Fall 2009 – page 1
c. Calculate depreciation expense for both 2007 and 2008 assuming Juniper Manufacturing elects to use the double-declining-balance depreciation method. 2007: ____ \$384,000 ______ 2008: ____ \$230,400 ______ Depreciation = Book value x 2/5 2007: 0.40 x [960,000 – 0] = 384,000 2008: 0.40 x [960,000 – 384,000] = 230,400 d. On January 1, 2009 Juniper Manufacturing closes its Indiana Plant and moves its manufacturing operations to Thailand. As part of the move it disposes of the equipment purchased on January 1, 2007. It is able to sell the equipment for \$420,000. Prepare the journal entries to record the sale of equipment assuming that Juniper Manufacturing used the double-declining-balance method to depreciate the equipment during 2007 and 2008. Cash 420,000 Accumulated depreciation 614,400 Gain on sale 74,400 Plant and Equipment 960,000 Question 1 continued over . . . Mgmt 200 – Final Exam – Fall 2009 – page 2

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## This note was uploaded on 05/25/2010 for the course MGMT 200 taught by Professor Greigg during the Spring '08 term at Purdue.

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Mgmt 200 Fall 2009 Exam Final Solution - First name Last...

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