Q1.Bob Company purchased equipment on January 1, 2011 for $80,000. It is estimated that the equipment will have a $8,000 salvage value at the end of its 4-year useful life. It is also estimated that the equipment will produce 288,000 units over its 4-year life.
Respond to the following independent questions in the space provided for each question.
1. Compute the amount of depreciation expense for the year ended December 31, 2011, using the straight-line method of depreciation.
2. If 44,000 units of product are produced in 2011 and 88,000 units are produced in 2012, what is the book value of the equipment at December 31, 2012? The company uses the units-of- activity depreciation method
3. If the company uses the double-declining-balance-method of depreciation, what is the balance of the Accumulated Depreciation-Equipment account at December 31, 2013?
Q2.Bob earns a salary of $5,000 per month during the year. FICA taxes are 8% on the first $100,000 of gross earnings. Federal unemployment insurance taxes are 6.2% of the first $7,000; however, a credit is allowed equal to the state unemployment insurance taxes of 5.2% on the $7,000. During the year, $12,800 was withheld for federal income taxes and 6% of Bob's salary was withheld for state income taxes.
Instructions
(a) Prepare a journal entry summarizing the payment of Bob's total salary during the year.
(b) Prepare a journal entry summarizing the employer payroll tax expense on Bob's salary for the year.
(c) Determine the cost of employing Bob for the year.