On January 1, 2014, CK Purchased a Machine That Had

question 26

Essay

On January 1, 2014, CK purchased a machine that had a list price of $22,980. CK paid cash of $10,000 and executed a one-year non-interest-bearing note for the $12,980 balance. The going rate of interest was 18 percent. Assume straight-line amortization with an estimated useful life of six years and a $1,200 estimated residual value. Amortization expense for the accounting year ending December 31, 2014, would be $___________________.

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Definitions:

Times Interest Earned

A ratio that measures creditor margin of safety for interest payments, calculated as income before interest and taxes divided by interest expense.

Income Tax Expense

The total amount of income tax a company reports as an expense in its income statement for a given period.

Interest Expense

The cost incurred by an entity for borrowed funds, representing the interest payments due to lenders or creditors during a specific period.

Current Ratio

A financial metric that evaluates a company's ability to pay off its short-term liabilities with its current assets.