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Property, plant and equipment consist of the following on December
31, 2005:
Property and plant
$750,000
Equipment
1,025,000
Total Property, Plant and Equipment
$1,775,000
Each additional machine that is needed to support the production level
expected during 2006 will cost $30,000 and be depreciated over five
years using the straight-line method. Assume that any equipment
purchases are made on the first day of the January and are operational
throughout the entire year.
No new equipment will be needed for the sales and administrative
departments.
2006 LONG-TERM DEBT INFORMATION
A long-term debt repayment (principle only) will be made on
December 31, 2006 for $255,000. The interest rate charged on the
debt balance throughout 2006 will be 7.5% and will be paid on
December 31, 2006.
If an additional machine is purchased, $5,000 will be paid in cash and
the remaining $25,000 will be financed at the 7.5% rate. This same
proportion of cash/additional debt will be applied to all additional
equipment purchased during 2006. Again, any purchases will be made
on January 1, 2006.
DIVIDEND POLICY
Fantastic, Inc.'s policy is to pay dividends on the last day of each
quarter. The total anticipated dividends for 2006 are $2.50 per share.
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ACCT 556 Week 7 Homework Problem
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