Company A depreciates its main assets over 10 years on a straight-line basis, with an estimated residual value of 10 percent of initial cost. Company A’s main competitor Company B estimates its depreciation of the similar assets using the straight-line method but assuming an average annual depreciation of 4.5 percent. No operating differences appear to be existing between these companies. Company A’s marginal tax rate is 20 percent, reported asset cost 1/1/2019 is 360,000, and accumulated depreciation 1/1/2019 is 162,000. An analyst is thinking of making the performance of these companies more comparable by adjusting the financial statements of Company A. How much larger would the balance sheet item Non-Current Tangible Assets be for Company A in 2019 (take both current and accumulated depreciation into consideration), if the analyst were to make an accounting adjustment so that Company A also uses the same depreciation rate as Company B?
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Company A depreciates its main assets over 10 years on a straight-line basis, with an estimated...
Company A depreciates its main assets over 10 years on a straight-line basis, with an estimated residual value of 10 percent of initial cost. Company A’s main competitor Company B estimates its depreciation of the similar assets using the straight-line method but assuming an average annual depreciation of 5.0 percent. No operating differences appear to be existing between these companies. Company A’s marginal tax rate is 20 percent, reported asset cost 1/1/2019 is 140,000, and accumulated depreciation 1/1/2019 is 88,200....
Redeau Company has been depreciating certain assets using the straight-line method. At the beginning of the current year, the company changed to the sum-of-the-years'-digits method to depreciate these assets. Which of the following statements regarding this change is true? A) The change should be accounted for prospectively. B) The accounting impact of the change is limited to the difference in current-year depreciation on the affected assets. C) The change should be accounted for with an adjustment of the accumulated depreciation...
A company depreciates its motor vehicles based on reducing balance method on strict time basis at the rate of 25 per cent per annum on 31 December each year.Depreciation on its plant at the rate of 10 per cent per annum, straight line method with a full year’s depreciation charged in the year of acquisition and none in the year of disposal.The following are the balances of the non-current assets as at 31 December 2015: Motor Vehicles $Original cost 50,000Accumulated depreciation (15,000)Net...
Zoso is a rental car company that is trying to determine whether to add 25 cars to its fleet. The company fully depreciates all its rental cars over five years using the straight-line method. The new cars are expected to generate $165,000 per year in earnings before taxes and depreciation for five years. The company is entirely financed by equity and has a 38 percent tax rate. The required return on the company’s unlevered equity is 12 percent, and the...
E8-8 (Static) Determining Financial Statement Effects of Depreciation and Repairs (Straight-Line Depreciation) LO8-2, 8-3 Hulme Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2020, an asset account for the company showed the following balances: $ Manufacturing equipment Accumulated depreciation through 2019 120,000 57,600 During 2020, the following expenditures were incurred for the equipment: Major overhaul of the equipment on January 2, 2020, that improved efficiency Routine maintenance and repairs on...
At 31 July 20X6, Helios International had non-current assets which had cost $310,000. At the same date, the accumulated depreciation on the assets was $120,000. The company had not disposed of any non-current assets during the year to 31 July 20X7, but acquired an asset at a cost of $79,200 on 1 January 20X7. Helios International depreciates non-current assets at a rate of 25% per annum. What is the company’s depreciation charge for the year to 31 July 20X7 using:...
The Jones Company purchased assets costing $214,000 which will be depreciated over 5 years using straight-line depreciation and no salvage value. Jones also purchased land and other assets, which are not depreciable, at a cost of $214,000. It is estimated that in 5 years, the value of these assets will be unchanged. Assume that annual cash profits are $122,000 and, for return on Investment (ROI) calculations, the company uses end-of-year asset values. If sales each year average $813,200, what will...
The Jones Company purchased assets costing $214,000 which will be depreciated over 5 years using straight-line depreciation and no salvage value. Jones also purchased land and other assets, which are not depreciable, at a cost of $214,000. It is estimated that in 5 years, the value of these assets will be unchanged. Assume that annual cash profits are $122,000 and, for return on investment (ROI) calculations, the company uses end-of-year asset values. If sales each year average $813,200, what will...
GIPI will depreciate the gymnasium building using the straight-line method over 10 years with a residual value of $5,000. Gym equipment will be depreciated using the double-declining-balance method, with an estimated residual value of $4,500 at the end of its four-year useful life. Record depreciation on 1/31 equal to one-twelfth the yearly amount. Record the transaction. -The General journal below is wrong when i clicked on check answer, if someone could correct it that would be great, thank you! Grid...
Blossom Company had the following assets on January 1, 2022. Item Useful Life (in years) Salvage Value $0 10 Machinery Forklift Truck Cost $81,000 40,000 46,400 Purchase Date Jan 1, 2012 Jan 1, 2019 Jan 1, 2017 5 0 3,000 8 During 2022, each of the assets was removed from service. The machinery was retired on January 1. The forklift was sold on June 30 for $13,000. The truck was discarded on December 31. Journalize all entries required on the...