Question

Question 4. 4. (TCO E) As of January 1, 2011,Survival Industries, Inc. purchased a boat at a cost of$360,000.
When purchased, the company was using the double-decliningdepreciation method.
Key info on the asset at time of purchase is thefollowing.
Estimated useful life is 6 years.
Residual Value is $0.
At the beginning of 2014, the CFO decided to change tostraight-line depreciationmethod.
Compute the depreciation expense for 2014. (Points : 5)

$35,556
$10,667
$60,000
$120,000

Question 5. 5. (TCO E) Mystical Corporationfound the following errors in their year-end financialstatements:
As of Dec.2012 As of Dec. 2013
EndingInventory $32,000understated $46,000 overstated
Depreciation Exp. $7,000 understated
On December 31, 2013, a fully depreciated machine was sold for$35,000 but the sale was not recorded until January 15, 2014 whenthe cash was received. In 2012, a three-year insurance premium wasprepaid for $45,000 of which the entire amount was expensed in thefirstyear.
There were no other errors or corrections. Ignore any taxconsiderations.
What is the total net effect of errors on Mystical's 2013 workingcapital? (Points : 5)

Working capital overstatedby $31,000
Working capital overstated by$11,000
Working capital understated by$4,000
Working capital understated by$36,000