Best regards Tablet in tle second poto(b) The ABC Puzzle company currently applies the straight-line depreciation method for adelivery truck that was purchased for €100,000 in on 1 Mar 2020 (useful life 5 years,salvage value €10,000). Your supervisor of the accounting department asks you to reviewthe adopted accounting policy for the truck. In particular, he wants to know whether itwould have been more reasonable for ABC company to adopt the units-of activity methodinstead, given that the ABC company wants to show a high net income in 2020. Assumethat the delivery truck has €0,45 depreciable cost per mile and that miles will be driven asshown below:60,000 miles50,000 miles40,000 miles30,000 miles20,000 miles200,000 miles20202021202220232024TotalCalculate and compare the depreciation schedules for the straight-line and units-of-activitymethod over the entire useful life of the truck. 2 of 4Question 1The ABC Puzzle company is a merchandising company that buys and sells puzzles. The company'send of 2020 Unadjusted- and Adjusted Trial Balances are as shown below. You have recently joinedthe ABC Puzzle's accounting department. Your supervisor asks you to take a closer look at theprepared Trial Balances before they are presented to the CFO.131 Dec 2020Unadjusted Trial BalanceAdjusting EntriesAdjusted Trial BalanceAccountsDebitCreditDebitCreditDebitCreditCash€ 120,000€ 120,000Accounts Receivable100,000100,000Notes Receivable15,00015,000Interest Receivable€ 1,5001,500Merchandise Inventory130,000130,000Prepaid Insurance2,000€ 1,0001,000Land70,00070,000Buildings & EquipmentAccumulated Depreciation350,000350,000€ 115,00045,000€ 160,000Accounts PayableNotes payableSalaries PayableInterest PayableDividends PayableBond payables180,000180,00025,00025,00015,00015,0001,2001,20020,00020,000100,000100,000Common stock(=Ordinary Share Capital)Additional Paid-in Capital(=Share Premium)Retained Earnings180,000180,00030,00030,00040,00040,000Sales Revenue600,000600,000Interest Revenue1,5001,500Rent Revenue10,00010,000Cost of Goods Sold408,000408,000Advertising ExpenseSalaries Expense20,00020,00080,00015,00095,000Interest Expense5,0001,2006,200Insurance Expense1,0001,000Depreciation Expense45,00045,000Totals1,300,0001,300,00063,70063,7001,362,7001,362,700

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Tablet in te Second ploto (b) The ABC Puzzle company currently applies the straight-line depreciation method for a delivery truck that was purchased for €100,000 in on 1 Mar 2020 (useful life 5 years, salvage value €10,000). Your supervisor of the accounting department asks you to review the adopted accounting policy for the truck. In particular, he wants to know whether it would have been more reasonable for ABC company to adopt the units-of activity method instead, given that the ABC company wants to show a high net income in 2020. Assume that the delivery truck has €0,45 depreciable cost per mile and that miles will be driven as shown below: 2020 60,000 miles 2021 50,000 miles 2022 40,000 miles 2023 30,000 miles 20,000 miles 200,000 miles 2024 Total Calculate and compare the depreciation schedules for the straight-line and units-of-activity method over the entire useful life of the truck.

Tablet in te Second ploto (b) The ABC Puzzle company currently applies the straight-line depreciation method for a delivery truck that was purchased for €100,000 in on 1 Mar 2020 (useful life 5 years, salvage value €10,000). Your supervisor of the accounting department asks you to review the adopted accounting policy for the truck. In particular, he wants to know whether it would have been more reasonable for ABC company to adopt the units-of activity method instead, given that the ABC company wants to show a high net income in 2020. Assume that the delivery truck has €0,45 depreciable cost per mile and that miles will be driven as shown below: 2020 60,000 miles 2021 50,000 miles 2022 40,000 miles 2023 30,000 miles 20,000 miles 200,000 miles 2024 Total Calculate and compare the depreciation schedules for the straight-line and units-of-activity method over the entire useful life of the truck.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter2: The Accounting Information System

Section: Chapter Questions

Problem 63.1C

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