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Question: use the following data to answer questions in this part...

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Use the following data to answer questions in this part:

Balance sheet data 2009

Company C

JVC

Cash

$1,050

$300

Accounts receivable

3,000

700

Inventory

2,500

800

Fixed assets

4,500

2,400

Investment in JVC

400

Total assets

$11,450

$4,200

Accounts payable

$2,500

$1,200

Long-term debt

3,000

2,200

Equity

5,950

800

Total liabilities and equity

$11,450

$4,200

Income statement 2009

Company C

JVC

Sales

$15,430

$2,500

Equity in JV earnings

100

COGS

5,000

1,700

Other expenses

7,600

600

Net income

$2,930

$200

Company C uses LIFO method for inventories. The LIFO reserve was $800 for 2008 (ending inventory for 2008 under LIFO was 1,500) and $900 for 2009.

In 2010, Company C purchases a milling machine, a type of machine used for shaping metal, at a total cost of $9,000. $1,500 was estimated to represent the cost of the rotating cutter, a significant component of the machine. The company expects the machine to have a useful life of eight years and a residual value of $1,000 and that the rotating cutter will need to be replaced after three years. The company uses straight-line depreciation for all assets.

Company C purchased a 7% bond, at par, for $10,000 at the beginning of the year 2010. Interest rates have recently increased and the market value clined $1,000.

a)Given the necessary information from the financial statements and footnotes convert 2009 ending inventory and COGS to a FIFO basis. Please explain your calculations.

b)How much depreciation expense would the company report in first year of depreciation if it uses the component method of depreciation, and how much depreciation expense would the company report in the first year if it does not use the component method? Please do not write down just numbers; you are expected to explain your calculation and answer.

c)Using the information about bond purchased in 2010, determine the bond’s effect on Company C’s financial statements under each classification of securities. Please explain your answers. 74

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