Accounting 2 Urgent

BCO123 Accounting II Task brief & rubrics

Task: Assignment 1 (34% of course grade)

You are asked to answer all the questions in the proposed three exercises.

This task assesses the following learning outcomes:

• Determine the cost of plant assets • Understand the reasons for depreciating fixed assets • Apply acquired knowledge and skills to calculate depreciation • Understand the concept of liabilities • Identify the nature of the amortization table

LAUNCH: WEEK 2 Friday November 13th, 2020 / DELIVERY: WEEK 2 Sunday November 15th, 2020, 23:59hrs ON MOODLE

Submission file format: Word document with all the answers, clearly identifying each exercise separately.

EXERCISE 1

Omega Inc. acquired a new piece of filtering equipment on April 2, 2017. The equipment is expected to have a 4-year useful life and a residual value of €20,000. The following expenditures were associated with the purchase.

List price of the equipment €145,000

Transportation charges 1,500

Property taxes 4,000

Installation of equipment 13,500

Interest charges 1,000

Insurance 2,000

Cost to repair equipment damaged during installation 900

Instructions:

(1) Determine the cost of this equipment to be established in the Equipment account of Omega Inc. (10 points)

(2) Prepare a complete depreciation schedule, beginning with calendar year 2017, under each of the methods listed below:

a. Straight-line, with fractional years rounded to the nearest whole month. (10 points) b. 200-percent declining-balance, using the half-year convention. (10 points) c. 150-percent declining-balance, using the half-year convention. (10 points)

(3) Assume that Omega Inc. sells the equipment on December 31, 2019, for €50,000 cash. Compute the resulting gain or loss from this sale under straight-line depreciation method used in part (2 a) and record the journal entry for the sale of the asset. (10 points)

EXERCISE 2:

As of December 31, 2019, Baker Corporation has prepared the following information regarding its liabilities and other obligations.

15-year bond issue that matures in one year €500,000

Accrued interest on the 15-year bond issue as of the balance sheet date €25,000

Notes payable, of which €20,000 will be repaid within the next 12 months € 100,000

Interest expense that will result from existing liabilities over the next 12 months €85,000

Cash deposits from customers for goods and services to be delivered over the next six months €200,000

Three-year commitment to Peter Smith as chief operating officer at a salary of €150,000 per year €450,000

Note payable due within 180 days (but that is approved to be extended for an additional 12 months) €125,000

Income taxes, of which €150,000 are currently payable and the remainder deferred indefinitely €275,000

Lawsuit pending against Baker, in which €300,000 is claimed in damages. Legal counsel can make no reasonable estimate of the company’s ultimate liability at this time.

Instructions:

(1) Prepare a listing of the Baker Corporation’s current and long-term liabilities as they should be presented in the company’s December 31, 2019 balance sheet. (15 points)

(2) Briefly explain why you have excluded any of the listed items in your listing of current and long-term liabilities. (10 points)

EXERCISE 3 (1) On 31 October 2017, Beta Inc. incurs a 30-year €600,000 mortgage liability in conjunction with the purchase of a hotel. This mortgage is payable in equal monthly installments of €6,485 which include interest computed at an annual rate of 12%. The first monthly payment is made on 30 November 2017. This mortgage is fully amortizing over 360 months. (a) Complete the amortization table for the first four payments by entering the correct amounts in the blank spaces provided. (10 points) Round to the nearest full number.

Reduction in Interest Payment Monthly Interest Unpaid Unpaid Period Date Payment Expense Balance Balance

Issue date 1 2 3 4

(b) Record the first payment in the general journal. (5 points)

Date Account Titles and Explanation Debit Credit

(2) Zeta Inc. received authorization on December 31, 2017, to issue €9,000,000 face value of 7%, 25-year bonds. The interest payment dates are June 30 and December 31. All the bonds were issued at par, plus one-month accrued interest on February 1, 2018. (a) Prepare the journal entry to record the issuance of the bonds on February 1, 2018. (5 points)

(b) Prepare the journal to record the first interest payment on the bonds at June 30, 2018 (5 points)

Date Account Titles and Explanation Debit Credit

Rubrics

Descriptor 9-10 The student demonstrates an excellent understanding of the

concepts. 8-8.9 The student demonstrates a good understanding of the concepts. 7-7.9 The student demonstrates a fair understanding of the concepts. 6-6.9 The student demonstrates some, but insufficient understanding of the

concepts. 3-5.9 The student demonstrates insufficient understanding of the concepts.

They may mention some relevant ideas or concepts, although it is clear that the relationship between them is not understood by the student.

1-2.9 The student demonstrates insufficient understanding of the concepts and does not mention any relevant ideas or concepts.

0 The student leaves the question blank or cheats.

Points are stated at the end of each question.