On April 2, 2011, Idaho Mining Co. pays $4,574,900 for an ore deposit containing 1,541,000 tons. The company installs machinery in the mine costing $215,900, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Idaho begins mining on May 1, 2011, and mines and sells 138,600 tons of ore during the remaining eight months of 2011. Prepare the December 31, 2011, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine’s depletion. (Round the cost per ton to 2 decimal places.)

On April 2, 2011, Idaho Mining Co. pays $4,574,900 for an ore deposit containing 1,541,000 tons. The company installs machinery in the mine costing $215,900, with an estimated seven-year life and no salvage value. The machinery will be abandoned when the ore is completely mined. Idaho begins mining on May 1, 2011, and mines and sells 138,600 tons of ore during the remaining eight months of 2011.

  

Prepare the December 31, 2011, entries to record both the ore deposit depletion and the mining machinery depreciation. Mining machinery depreciation should be in proportion to the mine’s depletion. (Round the cost per ton to 2 decimal places.)

 

Explanation:

To record depletion: [$4,574,900/1,541,000 tons = $2.97 per ton; 138,600 tons × $2.97 = $411,642].

To record depreciation: [$215,900/1,541,000 tons = $0.14 per ton; 138,600 tons × $0.14 = $19,404]. It's for education blog, it help the students to learn the concepts. Thanks

Finesse Co. purchases and installs a machine on January 1, 2011, at a total cost of $92,200. Straight-line depreciation is taken each year for four years assuming a 8-year life and no salvage value. The machine is disposed of on July 1, 2015, during its fifth year of service. Prepare entries to record the partial year’s depreciation on July 1, 2015. (Round intermediate calculations to the nearest whole dollar.)

Finesse Co. purchases and installs a machine on January 1, 2011, at a total cost of $92,200. Straight-line depreciation is taken each year for four years assuming a 8-year life and no salvage value. The machine is disposed of on July 1, 2015, during its fifth year of service.

 

Prepare entries to record the partial year’s depreciation on July 1, 2015. (Round intermediate calculations to the nearest whole dollar.)

 

Prepare entries to record the disposal under the following separate assumptions:

  

(1)	The machine is sold for $42,758 cash. (Round intermediate calculations to the nearest whole dollar.)

 

(2)

Finesse receives an insurance settlement of $38,724 resulting from the total destruction of the machine in a fire. (Round intermediate calculations to the nearest whole dollar.)

 

Explanation:

Annual depreciation = $92,200 / 8 years = $11,525

Depreciation for 6 months in 2015 = $11,525 × 6/12 = $5,763

(1) & (2)

Total accumulated depreciation at date of disposal:
Four years 2011-2014 (4 × $11,525)	$	46,100
Partial year 2015 (6/12 × $11,525)		5,763
Total accumulated depreciation	$	51,863

Patterson Company pays $316,900 for equipment expected to last four years and have a $30,000 salvage value. Prepare journal entries to record the following costs related to the equipment. 1. During the second year of the equipment’s life, $21,550 cash is paid for a new component expected to increase the equipment’s productivity by 10% a year.

Patterson Company pays $316,900 for equipment expected to last four years and have a $30,000 salvage value. Prepare journal entries to record the following costs related to the equipment.

  

1.

During the second year of the equipment’s life, $21,550 cash is paid for a new component expected to increase the equipment’s productivity by 10% a year.   2. During the third year, $5,388 cash is paid for normal repairs necessary to keep the equipment in good working order.   3. During the fourth year, $14,500 is paid for repairs expected to increase the useful life of the equipment from four to five years.

On April 1, 2010, Stone’s Backhoe Co. purchases a trencher for $260,000. The machine is expected to last four years and have a salvage value of $26,000. Compute depreciation expense for both 2010 and 2011 assuming the company uses the straight-line method.

On April 1, 2010, Stone’s Backhoe Co. purchases a trencher for $260,000. The machine is expected to last four years and have a salvage value of $26,000.

 

Compute depreciation expense for both 2010 and 2011 assuming the company uses the straight-line method.

Explanation:

Straight-line depreciation for 2010

[($260,000 – $26,000) / 4 years] × 9/12 = $43,875

  

Straight-line depreciation for 2011

($260,000 – $26,000) / 4 years = $58,500

Antiques ‘R’ Us is a mature manufacturing firm. The company just paid a dividend of $10.80, but management expects to reduce the payout by 5.25 percent per year, indefinitely. Required: If you require a return of 9 percent on this stock, what will you pay for a share today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Current share price $ Explanation: The constant growth model can be applied even if the dividends are declining by a constant percentage, just make sure to recognize the negative growth. So, the price of the stock today will be: P0 = D0 (1 + g) / (R – g) P0 = $10.80(1 – 0.0525) / [(.09 – (–.0525)] P0 = $71.81

Antiques ‘R’ Us is a mature manufacturing firm. The company just paid a dividend of $10.80, but management expects to reduce the payout by 5.25 percent per year, indefinitely.

Required:

If you require a return of 9 percent on this stock, what will you pay for a share today? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current share price	$

Explanation:

The constant growth model can be applied even if the dividends are declining by a constant percentage, just make sure to recognize the negative growth. So, the price of the stock today will be:

P0 = D0 (1 + g) / (R – g)

P0 = $10.80(1 – 0.0525) / [(.09 – (–.0525)]

P0 = $71.81

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next eleven years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $15.00 per share 12 years from today and will increase the dividend by 5.50 percent per year thereafter.

Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next eleven years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $15.00 per share 12 years from today and will increase the dividend by 5.50 percent per year thereafter.

Required:

If the required return on this stock is 13.50 percent, what is the current share price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Current share price	$

Explanation:

Here, we have a stock that pays no dividends for eleven years. Once the stock begins paying dividends, it will have a constant growth rate of dividends. We can use the constant growth model at that point. It is important to remember the general constant dividend growth formula is:

Pt = [Dt × (1 + g)] / (R – g)

This means that since we will use the dividend in Year 12, we will be finding the stock price in Year 11. The dividend growth model is similar to the present value of an annuity and the present value of a perpetuity: The equation gives you the present value one period before the first payment. So, the price of the stock in Year 11 will be:

P11 = D12 / (R – g)

P11 = $15.00 / (.1350 – .0550)

P11 = $187.50

The price of the stock today is simply the PV of the stock price in the future. We simply discount the future stock price at the required return. The price of the stock today will be:

P0 = $187.50 / 1.135011

P0 = $46.56

 

The stock price of Webber Co. is $53.80. Investors require a return of 12 percent on similar stocks. Required: If the company plans to pay a dividend of $3.55 next year, what growth rate is expected for the company’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Growth rate % Explanation: We need to find the growth rate of dividends. Using the constant growth model, we can solve the equation for g. Doing so, we find: g = R – (D1 / P0) g = .12 – ($3.55 / $53.80) g = .0540, or 5.40%

The stock price of Webber Co. is $53.80. Investors require a return of 12 percent on similar stocks.

Required:

If the company plans to pay a dividend of $3.55 next year, what growth rate is expected for the company’s stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Growth rate

%

Explanation:

We need to find the growth rate of dividends. Using the constant growth model, we can solve the equation for g. Doing so, we find:

g = R – (D1 / P0)

g = .12 – ($3.55 / $53.80)

g = .0540, or 5.40%