Questions:
1. Assuming that the tax laws require accountants to use a 10-year straight-line depreciation of the original purchase price net of the salvage value (e.g., a $10,000 piece of equipment with a salvage value of $1,000 would have annual depreciation of ($10,000 - $1,000)/10 = $900), calculate the annual accounting profits. |
2. Calculate the economic profits using the average annual opportunity cost of the capital. See ML203's third example for guidance. |
You are given the following information for a healthcare company: | ||
line # | ||
1 | Total revenue | 18,000,000 |
2 | Total non-capital costs | 14,400,000 |
3 | Capital equipment purchase price and original market value | 12,000,000 |
4 | Equipment salvage value, as percent of purchase price | 12% |
5 | Depreciable life of the capital equipment, years | 15 |
6 | Annual return on capital invested in a similarly risky investment |
11% |
Questions: 1. Assuming that the tax laws require accountants to use a 10-year straight-line depreciation of...
Total Revenue = $36,000,000 Total Non-capital costs = $32,400,000 Capital Equipment purchase Price and Original Market Value = $15,000,000 Equipment Salvage in percent = 2% Depreciable Life of the Capital, Years = 14 Annual return on capital invested in a similarly risky investment = 12% Accounting Annual Profit = $1,050,000 How would I calculate the economic profits using the average annual opportunity cost of the capital?
The Donut Stop acquired equipment for $10,000. The company uses straight-line depreciation and estimates a residual value of $2,000 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,000 from the original estimate of $2,000. Required: Calculate how...
Use straight line (SL) depreciation to determine a. annual depreciation charge (5 points) and b. annual book values for the life of the asset having the price of $1,900,000, depreciable life of 10 years, and the salvage value of $600,000. (10 points)
(9 points) Z Company is recording annual straight-line depreciation expense of $10,000 on a building purchased three years ago (January 1, 2015). The original cost of the equipment was $200,000 and the current book value (January 1, 2018) is $170,000. At the time of purchase, the asset was estimated to have a zero salvage value. On January 1, 2018, the company decided to reduce the original useful life by 25% and to establish a salvage value of $20,000. Ignore tax...
Given the following information, calculate the straight-line depreciation of the equipment. Equipment had a cash purchase price of $50,000; sales tax of $3,000; and installation costs of $1,000. Salvage value is expected to be $2,000. The useful life is expected to be 20 years.
Calculate the annual Straight Line depreciation charge for a asset with a cost basis of $12,000, a depreciable life of 10 years, and a Salvage value of $2,000. If you believe the useful life of an asset will be 10 years, the Bonus Depreciation method allows for 100% depreciation in year 1, and the MACRS method indicates the depreciable life is 7 years, what is the useful life you should use in capital recovery economic analysis? SHOW ALL CALCULATIONS
1. Straight-line depreciation Equipment acquired at the beginning of the year at a cost of $340,000 has an estimated residual Obj. 2 SHOW ME HOW value of $45,000 and an estimated useful life of 10 years. Determine (A) the depreciable cost, (B) the straight-line rate, and (C) the annual straight-line depreciation.
6. Depreciation methods Firms can use various methods to calculate depreciation, and it is important for you to consider these different methods when evaluating firms. The impact of different depreciation methods is stronger for asset-intensive firms. Major factors that affect the depreciation of a fixed asset include the purchase cost, residual/salvage value, and estimated useful life of the asset. The purchase cost includes the asset's explicit cost plus necessary costs associated with setting up and operating the asset (such as...
Prepare the depreciation tables for A. Straight Line, B. Double Declining Balance, and C. Units of Activity. Next Journalize the purchase of the truck, the first year's depreciation expense, and the disposal of the truck. (including explanations) Here's the data: Purchased on January 1, 2012 for $13,000. Has an estimated residual value of $1,000. Useful life of 5 years or 100,000 miles. Sold on December 31st, 2013 100 Depr Scheds Barb's Florists Solution with JE thru Disposal and T accounts XX...
The Donut Stop acquired equipment for $22,000. The company uses straight-line depreciation and estimates a residual value of $3,200 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,800 from the original estimate of $3,200. Required: Calculate how...