Return to questionThe Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $48.0 million andhaving a four-year expected life, after which the assets can be salvaged for $9.6 million. In addition, the division has $48.0 million inassets that are not depreciable. After four years, the division will have $48.0 million available from these nondepreciable assets. Thismeans that the division has invested $96.0 million in assets with a salvage value of $57.6 million. Annual depreciation is $9.6 million.Annual operating cash flows are $20.6 million. In computing ROI, this division uses end-of-year asset values in the denominator.Depreciation is computed on a straight-line basis, recognizing the salvage values noted. Ignore taxes.Required:a. & b. Compute ROI, using net book value and gross book value for each year. (Enter your answers as a percentage rounded to 1decimal place (i.e., 32.1).)Answer is complete but not entirely correct.ROIYear 1Year 2Year 3Net Book ValueGross Book Value12.8%10.9%14.3 %10.9%16.3 %10.9%Year 419.1%10.9%

Net Book Value -The term "net book value" (NBV) describes how an accountant records the assets or…

The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing having a four-year expected life, after which the assets can be salvaged for $9.6 million. In addition, the division has assets that are not depreciable. After four years, the division will have $48.0 million available from these nondeprecia means that the division has invested $96.0 million in assets with a salvage value of $57.6 million. Annual depreciation Annual operating cash flows are $20.6 million. In computing ROI, this division uses end-of-year asset values in the de Depreciation is computed on a straight-line basis, recognizing the salvage values noted. Ignore taxes. Required: a. & b. Compute ROI, using net book value and gross book value for each year. (Enter your answers as a percentage decimal place (i.e., 32.1).) Answer is complete but not entirely correct. Year 1 Year 2 ROI Net Book Value 12.8% 14.3 % Gross Book Value 10.9% 10.9%

The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing having a four-year expected life, after which the assets can be salvaged for $9.6 million. In addition, the division has assets that are not depreciable. After four years, the division will have $48.0 million available from these nondeprecia means that the division has invested $96.0 million in assets with a salvage value of $57.6 million. Annual depreciation Annual operating cash flows are $20.6 million. In computing ROI, this division uses end-of-year asset values in the de Depreciation is computed on a straight-line basis, recognizing the salvage values noted. Ignore taxes. Required: a. & b. Compute ROI, using net book value and gross book value for each year. (Enter your answers as a percentage decimal place (i.e., 32.1).) Answer is complete but not entirely correct. Year 1 Year 2 ROI Net Book Value 12.8% 14.3 % Gross Book Value 10.9% 10.9%

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 13PA: Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value...

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Urquhart Global purchases a building to house its administrative offices for $500,000. The best estimate of the salvage value at the time of purchase was $45,000, and it is expected to be used for forty years. Urquhart uses the straight-line depreciation method for all buildings. After ten years of recording depreciation, Urquhart determines that the building will be useful for a total of fifty years instead of forty. Calculate annual depreciation expense for the first ten years. Determine the depreciation expense for the final forty years of the assets life, and create the journal entry for year eleven.
Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one the company expects the truck to be driven for 26,000 miles; in year two, 30,000 miles; and in year three, 40,000 miles. Consider how the purchase of the truck will impact Montellos depreciation expense each year and what the trucks book value will be each year after depreciation expense is recorded.
Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is expected to be driven for 125,000 miles. Montello uses the units-of-production depreciation method, and in year one it expects to use the truck for 26,000 miles. Calculate the annual depreciation expense.
The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
Dunedin Drilling Company recently acquired a new machine at a cost of 350,000. The machine has an estimated useful life of four years or 100,000 hours, and a salvage value of 30,000. This machine will be used 30,000 hours during Year 1, 20,000 hours in Year 2, 40,000 hours in Year 3, and 10,000 hours in Year 4. With DEPREC5 still on the screen, click the Chart sheet tab. This chart shows the accumulated depreciation under all three depreciation methods. Identify below the depreciation method that each represents. Series 1 _____________________ Series 2 _____________________ Series 3 _____________________ When the assignment is complete, close the file without saving it again. Worksheet. The problem thus far has assumed that assets are depreciated a full year in the year acquired. Normally, depreciation begins in the month acquired. For example, an asset acquired at the beginning of April is depreciated for only nine months in the year of acquisition. Modify the DEPREC2 worksheet to include the month of acquisition as an additional item of input. To demonstrate proper handling of this factor on the depreciation schedule, modify the formulas for the first two years. Some of the formulas may not actually need to be revised. Do not modify the formulas for Years 3 through 8 and ignore the numbers shown in those years. Some will be incorrect as will be some of the totals. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as DEPRECT. Hint: Insert the month in row 6 of the Data Section specifying the month by a number (e.g., April is the fourth month of the year). Redo the formulas for Years 1 and 2. For the units of production method, assume no change in the estimated hours for both years. Chart. Using the DEPREC5 file, prepare a line chart or XY chart that plots annual depreciation expense under all three depreciation methods. No Chart Data Table is needed; use the range B29 to E36 on the worksheet as a basis for preparing the chart if you prepare an XY chart. Use C29 to E36 if you prepare a line chart. Enter your name somewhere on the chart. Save the file again as DEPREC5. Print the chart.
The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $48.0 million and having a four-year expected life, after which the assets can be salvaged for $9.6 million. In addition, the division has $48.0 million in assets that are not depreciable. After four years, the division will have $48.0 million available from these nondepreciable assets. This means that the division has invested $96.0 million in assets with a salvage value of $57.6 million. Annual depreciation is $9.6 million. Annual operating cash flows are $20.6 million. In computing ROI, this division uses end-of-year asset values in the denominator. Depreciation is computed on a straight-line basis, recognizing the salvage values noted. Ignore taxes. Required: a. & b. Compute ROI, using net book value and gross book value for each year. (Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).) Answer is complete but not entirely correct. ROI Year…
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