Business Assignment- Reese Corporation

Question:

Problem #1       Reese Corporation

Assume that the following was shown on the balance sheet related to property, plant and equipment on January 1, 2014:

            Total PPE:                   $29,347

            Less: Accum. Depr.      17,588

                                                $11,759

Also assume that a footnote says the following:  “property, plant, and equipment is depreciated using the straight-line method.”  Annual depreciation expense is approximately $1,800.

1. Estimate the average useful life of depreciable assets (assume no residual values).
2. Estimate the average age of depreciable assets on January 1, 2014.

Problem # 2 Obtain Wal-Mart’s 2013 Annual Report

1. a)         How much cash was received from the sale (disposal) of property, plant, and equipment during 2013?
2. b)         Assume the cost of the PPE sold during 2013 was $950M and the accumulated depreciation on PPE sold amounted to $350M.  What is the gain or loss on the sale?
3. Assume that Wal-Mart purchased equipment at the beginning of fiscal year 2009 for $480,000 cash.  The equipment had an estimated useful life of 8 years and a residual value of $30,000. 
4. What would depreciation expense be for year 3 under the straight-line method?
5. What would depreciation expense be for year 3 under the double-declining balance method?

1. What is the first year in which depreciation expense under the straight-line method is higher than under the declining balance method?
2. Assume Wal-Mart uses the straight-line depreciation method for its equipment.  Also assume that at fiscal year-end 2013, Wal-Mart sold the equipment purchased at the beginning of fiscal year 2009 for $200,000 cash.  Prepare the journal entry to record the sale of the equipment at year-end 2013.
3. a)         What was the total current portion of Wal-Mart’s long-term debt at January 31, 2013? 
4. b)         What would have been the effect on working capital on January 31, 2013 if the current portion of long-term debt had not been properly reclassified?  State the direction and dollar amount.
5. Refer to the Note 6 (with respect to the total long-term debt only).  Wal-Mart is scheduled to pay debt maturities each fiscal year-end as indicated in the notes.  At January 31, 2013, what was the present value of Wal-Mart’s fourth debt payment (due January 31, 2017)?  (assume an 8% interest rate)

Problem #3  Sayers

On December 31, 2013, Sayers Nissan issued $3 million of 10-year, 10% debentures.  The market interest rate at issuance was 12%.  Interest payments are semi-annual.

1. Compute the proceeds from the issuance and prepare the journal entry to record the issuance.
2. Prepare the journal entries to record the first two semiannual interest payments, including any bond discount or premium amortization.

3. Prepare the journal entry to record payment at the maturity date.
4. Show how the bond-related accounts would appear on the balance sheets as of December 31, 2013, and June 30, 2014.