buring the first month of its current fiscal year, Green Co. Incurred repair costs of $21,000 on a machine that had 4 years of remaining depreciable life. The repair cost was inappropriately capitalized. Green Co. reported operating Income of $167,000 for the current year. Required: a. Assuming that Green Co. took a full year's straight-line depreciation expense in the current year, calculate the operating Income that should have been reported for the current year. Operating Income b. Assume that Green Co.'s total assets at the end of the prior year and at the end of the current year were $939,000 and $1,003,000, respectively. Calculate ROI (based on operating Income) for the current year using the originally reported data and then using corrected data. (Round your answers to 1 decimal place. (e.g.. 32.1)) Original data Corrected data ROI Indicate the effect on ROI of subsequent years if the error is not corrected. O ROI will be too low. O ROI will be too high. O ROI will remains the same.
buring the first month of its current fiscal year, Green Co. Incurred repair costs of $21,000 on a machine that had 4 years of remaining depreciable life. The repair cost was inappropriately capitalized. Green Co. reported operating Income of $167,000 for the current year. Required: a. Assuming that Green Co. took a full year's straight-line depreciation expense in the current year, calculate the operating Income that should have been reported for the current year. Operating Income b. Assume that Green Co.'s total assets at the end of the prior year and at the end of the current year were $939,000 and $1,003,000, respectively. Calculate ROI (based on operating Income) for the current year using the originally reported data and then using corrected data. (Round your answers to 1 decimal place. (e.g.. 32.1)) Original data Corrected data ROI Indicate the effect on ROI of subsequent years if the error is not corrected. O ROI will be too low. O ROI will be too high. O ROI will remains the same.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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