question archive (a) Sietto Corporation reported net income of $74,000
(a) Sietto Corporation reported net income of $74,000
Subject:BusinessPrice: Bought3
(a) Sietto Corporation reported net income of $74,000. Depreciation expense for the year was $117,000. The company calculates depreciation expense using the straight-line method, with an average useful life of 10 years. Top management would like to switch to a 15-year useful life because depreciation expense would be reduced to $78,000. The CEO states, “Increasing the useful life would increase net income and net cash provided by operating activities." Required: (8 marks) Provide a comparative analysis showing net income and net cash provided by operating activities (ignoring other accrual adjustments) using a 10-year and a 15-year useful life. (Ignore income taxes.) Explain whether you agree with the CEO's statement? (b) Here are selected 2021 transactions of Reality Corporation. June 30 - Sold a computer that was purchased on January 1, 2019. The computer cost $45,000 and had a useful life of 3 years with no salvage value. The computer was sold for $5,000 cash. Dec. 31- Sold a delivery truck for $11,000 cash. The truck cost $30,000 when it was purchased on January 1, 2018 and was depreciated based on a 5-year useful life with a $5,000 salvage value. Required: (6 marks) Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable. Reality Corporation uses straight-line depreciation.
