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Question 1: Barker Corp., which has a calendar fiscal year, purchased its only depreciable capital asset on 1 January 20X3. Information related to...

Question 1:

Barker Corp., which has a calendar fiscal year, purchased its only depreciable capital asset on 1 January 20X3.


Information related to the depreciable asset:


original cost = $560,000

estimated residual value = $48,000

depreciation method = declining balance

depreciation rate = 20%


In 20X5, Barker decreased the estimated residual value to $16,000, and increased the depreciation rate to 30%. Both changes are the result of experience with the asset and revised expectations about the pattern of usage.


Additional information for 20X5:


revenue - $2,800,000

expenses other than

depreciation and tax - $1,680,000

gain/(loss) from discontinued

operations - before tax - $(40,000)

tax rate - 25%


Additional information for 20X4:


revenue - $2,240,000

expenses other than

depreciation and tax - $1,534,400

gain/(loss) from discontinued

operations - before tax - N/A (zero)

tax rate - 25%


Required:


1.Calculate the ending 20X5 balance of accumulated depreciation and show the 20X5 journal entry/entries for depreciation. (show Work)


2.Prepare the condensed comparative statements of comprehensive income for 20X4 & 20X5, including disclosures related to the accounting change. (show work)


Question 2:

Gray House is issuing bonds with 10.5% coupon rates that will mature 15 years from today. The bonds pay interest semi-annually and the bond is currently selling for $980. Calculate:

A) nominal yield (show work)

B) current yield (show work)

C) yield to maturity (show work)

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Solution... View the full answer

solution123.xls

This is a change in estimate; therefore, the prospective approach should be used. Revision of
accounting estimates are normal and expected; therefore, their effects should be allocated to the...

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