a) A machine is purchased for $120 000. It is estimated that it has a useful life of five years and will then be sold for $10 000. Using the straight-line method calculate the amount of depreciation to be charged each year and the carrying value of the machine at the end of the second year of its life.
b) Explain the difference between depreciation and accumulated depreciation.
c) If, due to an oversight, interest revenue of $2500 has been earned but has not been received in cash and is not recorded at the end of the accounting period, what is the effect on net profit and current assets or liabilities of this omission?
d) If equity at the beginning of the accounting period was $110 000 and at the end of the period $185 000, and drawings by the owner during the period were $40 000, calculate the amount of net profit that was earned during the period.
e) If the cash received from customers during the year is $90 000 and $20 000 is owed by customers at the beginning of the year and nothing at the end of the year, calculate the amount of credit sales for the year.
f) Explain the meaning of current assets and current liabilities.