Q #1: On 1-March-2010, Alpha Pharmaceuticals Ltd. purchased 10 machines for manufacturing tablets. The price of...

 

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Q #1: On 1-March-2010, Alpha Pharmaceuticals Ltd. purchased 10 machines for manufacturing tablets. The price of each machine is $150,000. The transportation and installation cost is 1% and 2.5% of the price respectively for each machine. The company also had to bear the cost of test runs for each machine, which were $1,500. The approximate repair and maintenance expense for each machine is $4,000 per year. The company paid 25% of price in cash and signed a 6 month, Notes Payable (N/P) for the remaining balance. The N/P bears interest expense for the company at 5% per annum. Each machine is useful for 5 years and experts estimate that each machine can be sold at the end of its useful life for 10% of its purchase price. During its useful life, the machine will produce 7,500,000 tablets. Following table shows number of tablets produced in each year. Please note that the company's fiscal year ends on 30th June. Year 1 2 3 4 5 Total Units Produced 2,500,000 1,700,000 1,400,000 1,200,000 700,000 7,500,000 Requirements: a) Record General Journal Entry for the purchase of the 10 Machines b) Record General Journal Entry for Accrued Interest Expense at the end of April 2010. c) Record Depreciation Expense for 10 machines under following methods for year 4 and 5 i. Straight Line Depreciation Method ii. Declining Balance Method 1+1+6+1+1 iii. Unit-of-Output Method d) What will be Book Value of these assets in Balance Sheet of year 4 and 5 under SLD and Unit-of-Output Method? e) What is the value of Accumulated Depreciation in year 2 and 3 under Declining Balance Method? Q #1: On 1-March-2010, Alpha Pharmaceuticals Ltd. purchased 10 machines for manufacturing tablets. The price of each machine is $150,000. The transportation and installation cost is 1% and 2.5% of the price respectively for each machine. The company also had to bear the cost of test runs for each machine, which were $1,500. The approximate repair and maintenance expense for each machine is $4,000 per year. The company paid 25% of price in cash and signed a 6 month, Notes Payable (N/P) for the remaining balance. The N/P bears interest expense for the company at 5% per annum. Each machine is useful for 5 years and experts estimate that each machine can be sold at the end of its useful life for 10% of its purchase price. During its useful life, the machine will produce 7,500,000 tablets. Following table shows number of tablets produced in each year. Please note that the company's fiscal year ends on 30th June. Year 1 2 3 4 5 Total Units Produced 2,500,000 1,700,000 1,400,000 1,200,000 700,000 7,500,000 Requirements: a) Record General Journal Entry for the purchase of the 10 Machines b) Record General Journal Entry for Accrued Interest Expense at the end of April 2010. c) Record Depreciation Expense for 10 machines under following methods for year 4 and 5 i. Straight Line Depreciation Method ii. Declining Balance Method 1+1+6+1+1 iii. Unit-of-Output Method d) What will be Book Value of these assets in Balance Sheet of year 4 and 5 under SLD and Unit-of-Output Method? e) What is the value of Accumulated Depreciation in year 2 and 3 under Declining Balance Method?

Answer rating: 100% (QA)

a 1 March 2010 Machines 150000 Notes Payable 150000 To record purchase of 10 machines b 30 April 201... View the full answer