2024 – P9 28A P10A 9B P11 29A P9 28A Swifty Delivery Service P10A 9B Axel needs new manufacturing equipment P11 29A The balance sheet of Ballcraft Inc

P9-28A P10A-9B P11-29A

 

P9-28A Swifty Delivery Service

P10A-9B Axel needs new manufacturing equipment

P11-29A The balance sheet of Ballcraft, Inc

 

P9-28A On January 9,2010, Swifty Delivery Service purchased a truck at a cost of $67,000. Before placing the truck in service, Swifty spent $2,200 painting it, $500 replacing tires, and $5,000 overhauling the engine. The truck should remain in service for 6 years and have a residual value of $14,700. The truck’s annual mileage is expected to be 15,000 miles in each of the first 4 years and 10,000 miles in each of the next 2 years-80,000 miles in total. In deciding which depreciation method to use, Jerry Speers, the general manager, requests depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance.)

 

Requirements

1. Prepare a depreciation schedule for each deprecation methods, showing asset cost, depreciation expense, accumulated depreciation, and asset book value.

2.Swifty prepares financial statements using the depreciation method that repost the highest net income in the early years of the asset use. For income-tax purposes, the company uses the depreciation method that minimizes income taxes in the early years. Consider the first year that Swifty uses the truck. Identify the depreciation methods that meet the general manager’s objectives, assuming the income tax authorities permit the use of the any of the methods.

 

 

 P10A-9B Axel needs new manufacturing equipment. Two companies can provide similar equipment but under different payment plans: Plan A: MRE offers to let Axel pay $55,000 each year for five years. The payments include interest at 12% per year. Plan B: Westernhome will make a single payment of $425,000 at the end of five years. This payment includes both principal and interest at 12%.

 

Requirements

1. Calculate the present value of Plan

A. 2. Calculate the present value of Plan B.

3. Axel will purchase the equipment that costs the least, as measured by present value. Which equipment should Axel select? Why? (Challenge)

 

 

P11-29A The balance sheet of Ballcraft, Inc., reported the following:

Preferrerd stock, $6 par,6% 5,000

shares authorized and issued $30,000

Common stock $4.00

par value, 45,000

shares authorized; 10,000

shares issued $40,000

Additional paid-in-capital-common 219,000

Total paid-in-capital $289,000

Retained earnings 90,000

Total stockholders’ equity $379,000

 

Preferred dividends are in arrears for two years, including the current year. On the balance sheet date, the market value of the Ballcraft common stock was $31 per share.

 

Requirements

1. Is the preferred stock cumulative or noncumulative? How can you tell ?

2. What is the total paid-in-capital of the company ?

3. What was the total market value of the common stock ?

 

4. Compute the book value per share of the common stock?