Questions -
Q1. Agazzi Company purchased equipment for $361,150 on October 1, 2012. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $34,720. Estimated production is 40,300 units and estimated working hours are 20,900. During 2012, Agazzi uses the equipment for 560 hours and the equipment produces 1,000 units.
Compute depreciation expense under each of the following methods. Agazzi is on a calendar-year basis ending December 31.
(a) Straight-line method for 2012
(b) Activity method (units of output) for 2012
(c) Activity method (working hours) for 2012
(d) Sum-of-the-years'-digits method for 2014
(e) Double-declining-balance method for 2013
Q2. Sport Pro Magazine sold 28,320 annual subscriptions on August 1, 2012, for $25 each.
Prepare Sport Pro's (a) August 1, 2012, journal entry and (b) the December 31, 2012, annual adjusting entry.
Q3. Lexington Corporation's weekly payroll of $28,280 included FICA taxes withheld of $1,710, federal taxes withheld of $3,090, state taxes withheld of $1,150, and insurance premiums withheld of $230.
Prepare the journal entry to record Lexington's payroll.
Q4. On December 31, 2012, Alexander Company had $1,296,800 of short-term debt in the form of notes payable due February 2, 2013. On January 21, 2013, the company issued 24,770 shares of its common stock for $43 per share, receiving $1,065,110 proceeds after brokerage fees and other costs of issuance. On February 2, 2013, the proceeds from the stock sale, supplemented by an additional $231,690 cash, are used to liquidate the $1,296,800 debt. The December 31, 2012, balance sheet is issued on February 23, 2013.
Show how the $1,296,800 of short-term debt should be presented on the December 31, 2012, balance sheet.
Q5. Selzer Equipment Company sold 599 Rollomatics during 2012 at $6,600 each. During 2012, Selzer spent $17,200 servicing the 2-year warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.
(a) Prepare 2012 entries for Selzer using the expense warranty approach. Assume that Selzer estimates the total cost of servicing the warranties will be $172,000 for 2 years. Use "Inventory" account to record the warranty expense.
(b) Prepare 2012 entries for Selzer assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $179,400 relates to sales of warranty contracts. Selzer estimates the total cost of servicing the warranties will be $172,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs. Use "Inventory" account to record the warranty expense.