# Answered Essay: piece of equipment was acquired on January 1, 2015, at a cost of \$46,000, with an estimated residual va

1.2. 3. 4.

A piece of equipment was acquired on January 1, 2015, at a cost of \$46,000, with an estimated residual value of \$4,000 and an estimated useful life of Four years. The company uses the double-declining-balance method. What is its book value at December 31, 2016? O \$25,000 O \$21,000 O \$23,000 O \$11.500

Under Double declining value, salvage value is ignored.

SLM depreciation = 46000 / 4 = \$ 11500

SLM dep. rate = 11500 / 46000 = 25 %

DDB rate = 25 * 2 = 50 %

DDB dep. ( 2015 ) = 46000 * 50 % = \$ 23000

Book value ( dec. 31, 2015 ) = 46000 – 23000 = \$ 23000

Now, Dep. ( 2016 ) = 23000 * 50 % = 11500

Book value ( dec. 31, 2016 ) = \$ 23000 – 11500 = \$ 11500

Option D is correct.

Note :- DDB dep. is always calculated on opening book value.

Option C is correct.

Prepaid expenses always become asset since they are paid in advance and therefore prepaid rent will be debited. Since cash was paid , therefore, cash goes out and it is credited.

The transactions related to PPE form part of cash flow from / used in investing activities.

The transactions related to working capital like inventory, accounts receivable etc. form part of cash flow from / used in operating activities.

The transactions related to financing of a company form part of cash flow from / used in financing activities.

Here the required answer is An inflow of \$ 3 million ( option C ) since bonds payable were increased by \$ 3 million which means funds were raised through issuance of bonds.

NUmber of issued shares = 15 million shares ( option C )

But number of outstanding shares = 15 million shares – 4.5 million shares = 10.5 million shares

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