Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Chapter 4, Problem 4.1WUE
Summary Introduction
To calculate: The depreciation schedule.
Introduction:
The MACRS depreciation (Modified Accelerated Cost Recovery System depreciation).is the standard method of present tax depreciation in Country U.
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E10-19 Distinguishing capital expenditures from revenue expenditures
Learning Objective 1
Consider the following expenditures:
a. Purchase price.
b. Ordinary recurring repairs to keep the machinery in good working order.
c. Lubrication before machinery is placed in service.
d. Periodic lubrication after machinery is placed in service.
e. Major overhaul to extend useful life by three years.
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h. Installation.
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A machine with a book value of $80,000 has an estimated five-year life. A proposal is offered to sell the old machine for $50,500 and
replace it with a new machine at a cost of $75,000. The new machine has a five-year life with no residual value. The new machine would
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(Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Differential Analysis
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April 11
Revenues:
Proceeds from sale of old machine $
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Direct labor (5 years)
Replace
Old
Machine
Machine
(Alternative 1) (Alternative 2)
Profit (Loss)
Continue
with Old
0
0 ✓
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40,500 X
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-48,500 X
-75,000 X
Differential
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40,500 X
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3,000 X
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Learning Objective 3: Compute partial year depreciation, and select the bestdepreciation method) Assume that on September 30, 2017, EuroAir, an international airlinebased in Germany, purchased a Jumbo aircraft at a cost of €45,000,000 (€ is the symbol for theeuro). EuroAir expects the plane to remain useful for four years (4,000,000 miles) and to havea residual value of €6,000,000. EuroAir will fly the plane 350,000 miles during the remainderof 2017. Compute EuroAir’s depreciation on the plane for the year ended December 31, 2017,using the following methods:a. Straight-lineb. Units-of-productionc. Double-declining-balanceWhich method would produce the highest net income for 2017? Which method produces thelowest net income?
Chapter 4 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 4.1 - Briefly describe the first four modified...Ch. 4.1 - Describe the overall cash flow through the firm in...Ch. 4.1 - Prob. 4.3RQCh. 4.1 - 4-B Why is depreciation (as well as amortization...Ch. 4.1 - Prob. 4.5RQCh. 4.1 - Prob. 4.6RQCh. 4.1 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Prob. 4.5WUECh. 4 - Prob. 4.1PCh. 4 - Prob. 4.2PCh. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.10PCh. 4 - Prob. 4.11PCh. 4 - Prob. 4.12PCh. 4 - Prob. 4.13PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Prob. 4.15PCh. 4 - Prob. 4.16PCh. 4 - Prob. 4.17PCh. 4 - Prob. 4.18PCh. 4 - Prob. 4.19PCh. 4 - Prob. 4.20PCh. 4 - Prob. 4.21PCh. 4 - Prob. 1SE
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