Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Chapter 10, Problem 1BTN
1.
To determine
Identify the decisions that managers like Person C must make in applying depreciation methods.
2.
To determine
Identify whether Person C’s rule is an ethical violation or it is a legitimate decision in computing depreciation.
3.
To determine
The manner in which Person C’s new depreciation rule will affect the profit margin of her business.
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Flo Choi owns a small business and manages its accounting. Her company just finished a year in which a large amount of borrowed funds was invested in a new building addition as well as in equipment and fixture additions. Choi’s banker requires her to submit semiannual financial statements so he can monitor the financial health of her business. He has warned her that if profit margins erode, he might raise the interest rate on the borrowed funds to reflect the increased loan risk from the bank’s point of view. Choi knows profit margin is likely to decline this year. As she prepares year-end adjusting entries, she decides to apply the following depreciation rule: All asset additions are considered to be in use on the first day of the following month. (The previous rule assumed assets are in use on the first day of the month nearest to the purchase date.) Required 1. Identify decisions that managers like Choi must make in applying depreciation methods. 2. Is Choi’s rule an ethical…
Flo Choi owns a small business and manages its accounting. Her company just finished a year in which a large amount of borrowed funds was invested in a new building addition as well as in equipment and fixture additions. Choi’s banker requires her to submit semiannual financial statements so he can monitor the financial health of her business. He has warned her that if profit margins erode, he might raise the interest rate on the borrowed funds to reflect the increased loan risk from the bank’s point of view. Choi knows profit margin is likely to decline this year. As she prepares year-end adjusting entries, she decides to apply the following depreciation rule: All asset additions are considered to be in use on the first day of the following quarter. (The previous rule assumed assets are in use on the first day of the month nearest to the purchase date.)
Discuss the following:
Identify decisions that managers like Choi must make in applying depreciation methods.
Is Choi’s rule an…
Aggressive Corporation approaches Matt Taylor, a loan officer for Oklahoma State Bank, seeking to increase the company’s borrowings with the bank from $100,000 to $150,000. Matt has an uneasy feeling as he examines the loan application from Aggressive Corporation, which just completed its first year of operations. The application included the following financial statements.
The income statement submitted with the application shows net income of $30,000 in the first year of operations. Referring to the balance sheet, this net income represents a more-thanacceptable 15% rate of return on assets of $200,000.
Matt’s concern stems from his recollection that the $100,000 note payable reported on the balance sheet is a three-year loan from his bank, approved earlier this year. He recalls another promising new company that, just recently, defaulted on its loan due to its inability to generate sufficient cash flows to meet its loan obligations.
Seeing Matt’s hesitation, Larry Bling, the CEO…
Chapter 10 Solutions
Principles of Financial Accounting.
Ch. 10 - A company paid 326,000 for property that included...Ch. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 1DQCh. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQ
Ch. 10 - Why is the Modified Accelerated Cost Recovery...Ch. 10 - Prob. 7DQCh. 10 - Identify events that might lead to disposal of a...Ch. 10 - Prob. 9DQCh. 10 - Is the declining-balance method an acceptable way...Ch. 10 - Prob. 11DQCh. 10 - Prob. 12DQCh. 10 - Prob. 13DQCh. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - APPLE On its recent balance sheet in Appendix A,...Ch. 10 - Prob. 17DQCh. 10 - Prob. 18DQCh. 10 - Prob. 19DQCh. 10 - Prob. 20DQCh. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - Prob. 3QSCh. 10 - Prob. 4QSCh. 10 - Prob. 5QSCh. 10 - Prob. 6QSCh. 10 - On January 1, the Matthews Band pays 65,800 for...Ch. 10 - Prob. 8QSCh. 10 - Revenue and capital expenditures 1. Classify the...Ch. 10 - Disposal of assets Garcia Co. owns equipment that...Ch. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 15QSCh. 10 - Caleb Co. owns a machine that had cost 42,400 with...Ch. 10 - Prob. 1ECh. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - NewTech purchases computer equipment for 154,000...Ch. 10 - Double-declining-balance depreciation In early...Ch. 10 - Straight-line depreciation and income effects P1...Ch. 10 - Double-declining-balance depreciation P1 Tory...Ch. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Revising depreciation C2 Apex Fitness Club uses...Ch. 10 - Prob. 14ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Montana Mining Co. pays 3,721,000 for an ore...Ch. 10 - Milano Gallery purchases the copyright on a...Ch. 10 - Prob. 20ECh. 10 - Prob. 21ECh. 10 - Lok Co. reports net sales of 5,856,480 for Year 2...Ch. 10 - Prob. 23ECh. 10 - Prob. 24ECh. 10 - Prob. 1APCh. 10 - Prob. 2APCh. 10 - Prob. 3APCh. 10 - Prob. 4APCh. 10 - Yoshi Company completed the following transactions...Ch. 10 - Onslow Co. purchased a used machine for 178,000...Ch. 10 - On July 23 of the current year, Dakota Mining Co....Ch. 10 - On January 1, Falk Company signed a contract to...Ch. 10 - Nagy Company makes a lump-sum purchase of several...Ch. 10 - Prob. 2BPCh. 10 - Prob. 3BPCh. 10 - Prob. 4BPCh. 10 - Prob. 5BPCh. 10 - On January 1, Walker purchased a used machine for...Ch. 10 - Prob. 7BPCh. 10 - Prob. 8BPCh. 10 - Prob. 10SPCh. 10 - Prob. 1AACh. 10 - Prob. 2AACh. 10 - Prob. 3AACh. 10 - Prob. 1BTNCh. 10 - Prob. 5BTN
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