Question

Company “Shimi" is a cigars importer, manufacturer and distributer which was established on Jan 01 2015. During 2015 the company purchased the following assets: 1. Jan 1 - A building for $82,000. The company also installed a new ventilation system that wasn’t there before, the total system cost (including the installation) was $3,000. On that same day the company also paid $2,500 for fire insurance for 2015. The building is depreciated using the Straight Line Method, its useful life is 25 years and it has a salvage value of $10,000. Jan 1- A humidor (a large box with constant humidity that is used to store cigars) for $10,000. The company spent an additional $500 for delivery. The salvage value of the humidor is $1,000 and its useful life is 10 years. The company uses the Double Declining balance depreciation method to depreciate the humidor. In the end of the year the company came to an understanding that smoking is not healthy and decided to import and distribute Vitamins instead of cigars. On Dec 30 2015 the company sold the humidor for $9,000. Apr. 1- A cigar rolling machine. The machine has a useful life of 5 years. The machine is expected to roll a total of 150,000 cigars. The estimated salvage value of the machine is $1,000. The depreciation expense for the rolling machine for 2015 is $1,600. The machine rolled in 2015 and 2016 20,000 cigars and 3,000 cigars, respectively. On Feb 1 2016 the company sold the rolling machine for $10,000. The company depreciates the machine using the unit of production method. 2. 3. Required: A. What are the depreciation expenses for 2015 for each of the assets above? (2 points) B. What is the net balance of PP&E on Dec 31, 2015? (4 points) C. What is the company's capital gain/loss on the sales of the humidor and the rolling machine (for each of the assets)? (4 points) D. The content library is the biggest asset on NETFLIX’s balance sheet. The following is taken from NETFLIX INC annual report for 2014: "The company licenses and acquires right to stream TV shows, movies and original content to members for unlimited viewing. These rights are for a fixed fee and specify windows of availability.….. The company amortizes the content library in “cost of revenues" on a straight line or on an accelerated basis... “ Where usually amortization expense are written in the income statement? Explain why NETFLIX has written the amortization under cost of revenues? (3 points)

no handwritten work

Answer 1

A compot golling JANI - Building cost Installation cost cast of Building - $82.000 $3.000 $ 85,00 185,000 - $10,000 Depreciation Straight line Methad) 35 years Depreciation : $30.00 "Jq1 - Humide cost sallage Aalue $10.000 $IDO Depreciation $10,000 - $100 10 yes Depreciation = $900 Apr 1. - A Cigat Polling machines B Net balance of ppce on Dec 31, 2015 Bulding - $85.000 - $3.000 $ 82.000 Humido! =$10,000 - $1000 - $90000 cigal malling Machine $ 20,000 - $1600 - $18.400 : Total nlet balance of p p q E on Dec 31, 2015 is $ 82.000 + $ 18. uace - $ 1.00, 100. © Sale compute of the company's capital gaiolloss on the humidor gain/tors -- $10,000 + $500 - $900 - $ 9000 capital loss on humidor $500. 2020-1-21 18:49

A compot golling JANI - Building cost Installation cost cast of Building - $82.000 $3.000 $ 85,00 185,000 - $10,000 Depreciation Straight line Methad) 35 years Depreciation : $30.00 "Jq1 - Humide cost sallage Aalue $10.000 $IDO Depreciation $10,000 - $100 10 yes Depreciation = $900 Apr 1. - A Cigat Polling machines B Net balance of ppce on Dec 31, 2015 Bulding - $85.000 - $3.000 $ 82.000 Humido! =$10,000 - $1000 - $90000 cigal malling Machine $ 20,000 - $1600 - $18.400 : Total nlet balance of p p q E on Dec 31, 2015 is $ 82.000 + $ 18. uace - $ 1.00, 100. © Sale compute of the company's capital gaiolloss on the humidor gain/tors -- $10,000 + $500 - $900 - $ 9000 capital loss on humidor $500. 2020-1-21 18:49