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A company purchased equipment for $325,000 on January 1, 2010. The company expects
$ 7.00

Q1. A company purchased equipment for $325,000 on January 1, 2010. The company expects the equipment to last for eight years or 60,000hours of operation, with an estimated salvage value of $25,000. During 2010, the equipment was in operations for 8,000 hours, while in 2011 the equipment was in operations for 8,700 hours.Compute the depreciation expense relating to the equipment for 2010 and 2011 using the following depreciation methods:

a. Straight-line

b. Double-declining-balance

c. Units-of-production. 

Q2. Wal-Mart had income before interest expense and income taxes of $12,581 million and interest expense of $1,063 million. Sears had income before interest expense and income taxes of $3,596 million and interest expense of $1,143 million. Calculate the times interest earned ratio for each company and comment on the results.

Q3. Explain the present value concept and how it applies to long-term liabilities. 

 

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