14A Martin Company purchases a machine at the beginning of t

14A. Martin Company purchases a machine at the beginning of the year at a cost of $135,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 4 years with a $11,250 salvage value. Depreciation expense in year 4 is:

14B. On January 1 of Year 1, Congo Express Airways issued $4,400,000 of 7%, bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,994,000 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized using the straight-line method at a rate of $14,500 every 6 months. The life of these bonds is:

Solution

14 A) Rate= 1/4*2 0.5 50% Depreciation expense year 1 135000*50%= 67500 year 2 (135000-67500)*50% 33750 year 3 (67500-33750)*50%= 16875 year 4 (16875-11250)= 5625 answer Depreciation for year 4 is $5,625 14 B) total discount Face value        44,00,000 less issue price 39,94,000 total discount          4,06,000 discount period= 406,000/14500 28 hence life of these bonds is 14 years