Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Chapter 6, Problem 10MCQ
To determine
Identify the correct option for the given statement.
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Autry Company uses the straight-line depreciation method, and reports the information below for its
plant assets below:
Cost: $850,000.
Annual depreciation expense: $50,000.
Accumulated depreciation expense: $200,000.
Required:
a. Compute the analytical measures of plant age for Autry Company
b. What information is useful to determine an estimated point of plant asset replacement in a forecast
of future cash flows?
c. Will the analytical measures of plant age impact (be included) an analyst's forecast in this case?
A company purchased a valuable capital asset three years ago for $8.2 million and it currently has a book value of $6.2 million. The asset is now being sold for $11.6 million.
(a) What is the amount of the depreciation recapture, ordinary losses, and capital gain associated with the sale of the asset?
Depreciation Recapture: $ Blank 1. Calculate the answer by read surrounding text. million
Ordinary Losses: $ Blank 2. Calculate the answer by read surrounding text. million
Capital Gain: $ Blank 3. Calculate the answer by read surrounding text. million
(b) Assuming that the company is subject to a federal income tax rate of 21%, a state income tax rate of 5.6% and a federal capital gains tax rate of 15%, what is the combined state plus federal tax rate and how much will the company owe in taxes as the result of this sale?
Combined State & Federal Tax Rate: Blank 4. Calculate the answer by read surrounding text. %
Taxes Owed: $ Blank 5. Calculate the answer by read surrounding text.…
Given a cost of a depreciable fixed asset of $24,000 with a salvage value of $2,000 and a life of 5 years, what is the annual depreciation of the fixed asset using the straight-line method? What would be the depreciation in the second year if it used the declining balance method at double the straight-line rate?
In regards to question #1, if the company used the straight-line method and sold the asset after 4 years for $7,000, what would be the journal entry needed to record the transaction? What if they sold it for $5,000?
Chapter 6 Solutions
Financial Accounting
Ch. 6 - For each of the following costs, indicate whether...Ch. 6 - Prob. 2YTCh. 6 - For each of the following, give the term for...Ch. 6 - On January 1, 2010, Access Company purchased a new...Ch. 6 - Prob. 5YTCh. 6 - An asset costs 50,000, has an estimated salvage...Ch. 6 - Prob. 7YTCh. 6 - Prob. 8YTCh. 6 - Prob. 1QCh. 6 - What is the difference between capitalizing and...
Ch. 6 - Prob. 3QCh. 6 - What does amortization mean?Ch. 6 - Prob. 5QCh. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - Prob. 8QCh. 6 - What is the residual value, or salvage value, of...Ch. 6 - What is the difference between depreciation...Ch. 6 - Prob. 11QCh. 6 - Explain the difference between the three...Ch. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - What types of costs related to long-term...Ch. 6 - How is a gain or loss on the disposal of an asset...Ch. 6 - How does goodwill arise?Ch. 6 - Prob. 19QCh. 6 - Prob. 20QCh. 6 - Prob. 21QCh. 6 - Prob. 1MCQCh. 6 - Prob. 2MCQCh. 6 - Prob. 3MCQCh. 6 - Prob. 4MCQCh. 6 - Prob. 5MCQCh. 6 - Prob. 6MCQCh. 6 - Prob. 7MCQCh. 6 - Prob. 8MCQCh. 6 - Prob. 9MCQCh. 6 - Prob. 10MCQCh. 6 - Prob. 1SEACh. 6 - Prob. 2SEACh. 6 - Prob. 3SEACh. 6 - Prob. 4SEACh. 6 - Prob. 5SEACh. 6 - Calculate depreciation expense: double-declining...Ch. 6 - Prob. 7SEACh. 6 - Prob. 8SEACh. 6 - Mining Expedition Company purchased a coal mine on...Ch. 6 - Unique Quality Recourses purchased a patent for...Ch. 6 - Analyze revenue and capital expenditures. (LO 4)....Ch. 6 - On January 1, 2010, the Premium Beer Corporation...Ch. 6 - Prob. 13SEACh. 6 - Prob. 14SEACh. 6 - Prob. 15SEBCh. 6 - Prob. 16SEBCh. 6 - Prob. 17SEBCh. 6 - Prob. 18SEBCh. 6 - Prob. 19SEBCh. 6 - Calculate depreciation expense: double-declining...Ch. 6 - Prob. 21SEBCh. 6 - Prob. 22SEBCh. 6 - Prob. 23SEBCh. 6 - Prob. 24SEBCh. 6 - Prob. 25SEBCh. 6 - Prob. 26SEBCh. 6 - Prob. 27SEBCh. 6 - Prob. 28SEBCh. 6 - Prob. 29EACh. 6 - Prob. 30EACh. 6 - Prob. 31EACh. 6 - Prob. 32EACh. 6 - Calculate depreciation under alternative methods....Ch. 6 - Soda Pop Bottling Company bought equipment for...Ch. 6 - Prob. 35EACh. 6 - Prob. 36EACh. 6 - Prob. 37EACh. 6 - Prob. 38EACh. 6 - Prob. 39EACh. 6 - Prob. 40EACh. 6 - Prob. 41EACh. 6 - Prob. 42EACh. 6 - Prob. 43EACh. 6 - Prob. 44EACh. 6 - Prob. 45EACh. 6 - Big Peach Athletics sold assets with an original...Ch. 6 - Prob. 47EACh. 6 - Prob. 48EACh. 6 - Prob. 49EBCh. 6 - Prob. 50EBCh. 6 - Prob. 51EBCh. 6 - Prob. 52EBCh. 6 - Calculate depreciation under alternative methods....Ch. 6 - Pristine Carpet Cleaner bought a new steamer for...Ch. 6 - Prob. 55EBCh. 6 - Prob. 56EBCh. 6 - Prob. 57EBCh. 6 - Prob. 58EBCh. 6 - Prob. 59EBCh. 6 - Prob. 60EBCh. 6 - Prob. 61EBCh. 6 - Prob. 62EBCh. 6 - Prob. 63EBCh. 6 - Prob. 64EBCh. 6 - Prob. 65EBCh. 6 - Prob. 66EBCh. 6 - Prob. 67EBCh. 6 - Prob. 68EBCh. 6 - Prob. 69PACh. 6 - Prob. 70PACh. 6 - Prob. 71PACh. 6 - Prob. 72PACh. 6 - Prob. 73PACh. 6 - Prob. 74PACh. 6 - Prob. 75PACh. 6 - Prob. 76PACh. 6 - Prob. 77PACh. 6 - Prob. 78PACh. 6 - Prob. 79PBCh. 6 - Prob. 80PBCh. 6 - Prob. 81PBCh. 6 - Prob. 82PBCh. 6 - Prob. 83PBCh. 6 - Prob. 84PBCh. 6 - Prob. 85PBCh. 6 - Elite Cleaners bought a new machine on January 1,...Ch. 6 - Prob. 87PBCh. 6 - Prob. 88PBCh. 6 - Prob. 1FSACh. 6 - Prob. 2FSACh. 6 - Prob. 1CTPCh. 6 - Prob. 2CTPCh. 6 - Prob. 3CTPCh. 6 - Prob. 1IECh. 6 - Prob. 2IECh. 6 - Prob. 3IE
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- Assume a company did not purchase any equipment during the year, but it did sell a piece of equipment that had an original cost of $500,000 and accumulated depreciation of $300,000. The gain on the sale was $25,000. Based solely on the information provided, the company’s net cash provided by (used in) investing activities would be: Multiple Choice $200,000. $225,000. $250,000. $275,000.arrow_forwardAn asset that cost $20,000 and on which depreciation of $15,000 has been recorded is traded in on a new replacement asset. The sales price, also the fair value, of the new asset is $27,000. The owner of the old asset was given an allowance of $7,000 for the old asset and paid $20,000 in cash. For financial accounting purposes, what is the amount of gain or loss recorded? Question 5 options: a. a gain of $2,000 b. no gain or loss c. a loss of $2,000 d. a gain of $7,000arrow_forwardSlipper Company sold a productive asset, a machine, for cash. It originally cost Slipper $20,000. The accumulated depreciation at the date of disposal was $15,000. A gain on the disposal of $2,000 was reported. What was the asset's selling price?arrow_forward
- Suppose that Petrobras assumes a zero-salvage value for their "Equipment and other assets." For each $100 in new asset investments, what is the annual amount of depreciation expense charged to the income statement?arrow_forwardPhelm Corporation sold a piece of equipment for cash and recognized a gain of $5,000. The original cost was $34,000 and the accumulated depreciation just prior to the sale totaled $19,000. What amount will appear in the investing activities section of the statement of cash flows? $20,000 $54,000 $10,000 $15,000arrow_forward3. ABC Company had purchased equipment for P10,000,000, on January 1, 20X1. The equipment had a 5-year life and a salvage value of 10%. ABC Company depreciated the equipment using the straight-line method. On December 31, 20X3, ABC had doubts on the recoverability of the carrying amount of this equipment. On December 31, 20X3, the undiscounted expected net future cash inflows related to the continued use and eventual disposal of the equipment totaled P5,000,000. The equipment’s fair value on December 31, 20X3 is P4,500,000. After any loss on impairment has been recognized, what is the carrying amount of the equipment?arrow_forward
- In 20x7, Sweet Treats sold a piece of equipment with a purchase value of $371,000 and acumulated depreciation of $247,000 for $75,000. Sweet Treats realized a loss of $49.000 n the sale HoW Would this transaction affect overall cash flows? O a Cash flows would increase by $26.000, 0b Cash flows would increase by S49.00 0¢ Cash flows would ncrease by $75.00 0d Cash flows would decrease by $49.00arrow_forward1) Darling Paper Container, Inc. purchased several machines at a total cost of $300,000. The installation cost for this equipment was $25,000. The firm plans to depreciate the equipment using the MACRS 5-year normal recovery period. Prepare a depreciation schedule showing the depreciation expense for each year. 2) Identify each expense or revenue as a cash flow from operating activities (O), a cash flow from investment activities (I), or a cash flow from financing activities (F). Administrative expenses Rent payment Interest on a note payable Interest on a note receivable Sale of equipment Dividend payment Stock repurchase Sale of finished goods Labor expense Sale of a bond issue Repayment of a long-term debt Selling expenses Depreciation expense Sale of common stock Purchase of fixed assets 3) Please read the “COPING WITH UNCERTAINTY IN THE CASH BUDGET” topic in your book on pages 133-134 before solving this question. Terrel Manufacturing expects stable sales through the…arrow_forwardA depreciable property costing P1,400,000 with original residual value of P80,000 after 10 years, had been revalued at a replacement cost of P1,680,000 with residual value of P20,000. The age of the asset is four years when it was revalued. What is the revaluation surplus? Please answer it complete using good accounting form. Thank youarrow_forward
- a) Darling Paper Container, Inc. purchased several machines at a total cost of $300,000. The installation cost for this equipment was $25,000. The firm plans to depreciate the equipment using the MACRS 5-year normal recovery period. Prepare a depreciation schedule showing the depreciation expense for each year. b) Identify each expense or revenue as a cash flow from operating activities (O), a cash flow from investment activities (I), or a cash flow from financing activities (F).a. Administrative expensesb. Rent paymentc. Interest on a note payabled. Interest on a note receivablee. Sale of equipmentf. Dividend paymentg. Stock repurchaseh. Sale of finished goodsi. Labor expensej. Sale of a bond issuek. Repayment of a long-term debtl. Selling expensesm. Depreciation expensen. Sale of common stocko. Purchase of fixed assetsarrow_forwardJBS Inc. recently reported net income of $4,650 and depreciation of $855. How much was its net cash flow, assuming it had no amortization expense and sold none of its fixed assets? Group of answer choices $5,786.75 $5,223.25 $5,505.00 $4,955.59 $4,701.31arrow_forwardc) In practice, would you expect the depreciation expense for a non-current asset to be overestimated or underestimated? Explain why this is the case. d) Oak Ltd purchased a machine for £40,000. At the end of its useful life of four years, the amount received on sale was £4,000. When the asset was purchased,the business received two estimates of the likely residual value of the asset. These were: (a) £8,000 and (b) zero. Show the annual depreciation expenses over the four years and the total depreciation expenses for the asset under each of the two estimates. The straight-line method should be used to calculate the annual depreciation expenses.arrow_forward
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