Bundle: Financial Accounting: Tools for Business Decision Making 8e Binder Ready Version + WileyPLUS Registration Code
8th Edition
ISBN: 9781119221647
Author: Paul D. Kimmel
Publisher: Wiley (WileyPLUS Products)
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Question
Chapter 9, Problem 24Q
To determine
Methods of
The three methods of depreciation are:
- Straight-line method: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.
- Units-of-activity method: In this method of depreciation, the amount of depreciation is charged based on the unit of production each year.
- Double-declining balance method (Accelerated method): In this method of depreciation, the diminishing value of the asset is taken into consideration for determining the depreciation for the succeeding years.
To explain: the complications that might arise while comparing the results from two different depreciation methods followed by two companies.
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Why do accountants have to classify items as capital or revenue expenditures? Why do you treat exchanges of similar and dissimilar assets differently? Aren't they all exchanges?
Is it true that the higher the depreciation, the lower the net income? If that is the case, why would we not want the lowest depreciation method so we can show the highest net income?
Why do we have various methods of depreciation? Isn't that encouraging misleading results?
Sheldon Crop wishes to use different depreciation methods for the major classes of property, plant, and equipment. What should the company do?
a.The company should choose the most generally advantageous method and use that one for all classes of property, plant and equipment.
b.The company should not separate plant, property and equipment into classes and therefore they should use the same depreciation method for all assets.
c.The company should add notes to explain which methods are used for which classes and clearly disclose the amounts in the financial statements.
d.The company should make separate financial statements for each class of property, plant and equipment in order to use different methods of depreciation.
What is the difference between depreciation expense and accumulated depreciation?
What two items surprised you that a company is allowed to capitalize?
What do you know as reasons a company may choose one deprecation method over another?
Chapter 9 Solutions
Bundle: Financial Accounting: Tools for Business Decision Making 8e Binder Ready Version + WileyPLUS Registration Code
Ch. 9 - Prob. 1QCh. 9 - Prob. 2QCh. 9 - Prob. 3QCh. 9 - Prob. 4QCh. 9 - Prob. 5QCh. 9 - Prob. 6QCh. 9 - Prob. 7QCh. 9 - Prob. 8QCh. 9 - Prob. 9QCh. 9 - In the fourth year of an assets 5-year useful...
Ch. 9 - Prob. 11QCh. 9 - Prob. 12QCh. 9 - Prob. 13QCh. 9 - Prob. 14QCh. 9 - Prob. 15QCh. 9 - Prob. 16QCh. 9 - Prob. 17QCh. 9 - Prob. 18QCh. 9 - Prob. 19QCh. 9 - Prob. 20QCh. 9 - Prob. 21QCh. 9 - Prob. 22QCh. 9 - Give an example of an industry that would be...Ch. 9 - Prob. 24QCh. 9 - Prob. 25QCh. 9 - Prob. 26QCh. 9 - Prob. 27QCh. 9 - Prob. 9.1BECh. 9 - Prob. 9.2BECh. 9 - Prob. 9.3BECh. 9 - Prob. 9.4BECh. 9 - Prob. 9.5BECh. 9 - Prob. 9.6BECh. 9 - Prob. 9.7BECh. 9 - Prob. 9.8BECh. 9 - Prob. 9.9BECh. 9 - Prob. 9.10BECh. 9 - Prob. 9.11BECh. 9 - Prob. 9.12BECh. 9 - Prob. 9.13BECh. 9 - Prob. 9.14BECh. 9 - Prob. 9.1DIECh. 9 - Prob. 9.2ADIECh. 9 - Prob. 9.2BDIECh. 9 - Prob. 9.3DIECh. 9 - Match the statement with the term most directly...Ch. 9 - Prob. 9.5DIECh. 9 - Prob. 9.1ECh. 9 - Prob. 9.2ECh. 9 - Prob. 9.3ECh. 9 - Prob. 9.4ECh. 9 - Prob. 9.5ECh. 9 - Prob. 9.6ECh. 9 - Prob. 9.7ECh. 9 - Prob. 9.8ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.10ECh. 9 - Prob. 9.11ECh. 9 - Prob. 9.12ECh. 9 - Prob. 9.13ECh. 9 - Prob. 9.14ECh. 9 - Prob. 9.15ECh. 9 - Prob. 9.16ECh. 9 - Prob. 9.17ECh. 9 - Prob. 9.18ECh. 9 - Prob. 9.19ECh. 9 - Prob. 9.20ECh. 9 - Prob. 9.1APCh. 9 - Prob. 9.2APCh. 9 - Prob. 9.3APCh. 9 - Prob. 9.4APCh. 9 - Prob. 9.5APCh. 9 - Prob. 9.6APCh. 9 - Prob. 9.7APCh. 9 - Prob. 9.8APCh. 9 - Prob. 9.9APCh. 9 - Prob. 9.1CACRCh. 9 - Prob. 9.2CACRCh. 9 - Prob. 9.1EYCTCh. 9 - Prob. 9.2EYCTCh. 9 - Prob. 9.3EYCTCh. 9 - Prob. 9.4EYCTCh. 9 - Prob. 9.6EYCTCh. 9 - Prob. 9.7EYCTCh. 9 - Prob. 9.8EYCTCh. 9 - Prob. 9.9EYCTCh. 9 - Prob. 9.10EYCTCh. 9 - CONSIDERING PEOPLE, PLANET, AND PROFIT The March...Ch. 9 - Prob. 9.1IFRSCh. 9 - Prob. 9.2IFRSCh. 9 - Prob. 9.3IFRSCh. 9 - Prob. 9.4IFRS
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Similar questions
- What do you know about PPE ( property, plant and equipment ? • What range of measures is used to determine amounts for these items in the reports of the individual companies? • Do you think it is valid to add the items, given the measures used? • How would you interpret the total amount for property, plant and equipment in the financial statements? • Compare the measures used by the different companies for similar items. Are there any inconsistencies in how similar items are measured by the different companies? Answer above by seeing 2020 annual report of Coles & WoolWorths AU and evaluate the PPE disclosure of WOW and COL.arrow_forwardAs explained in this chapter, accounting theory allows firms to choose a depreciation method from several equally acceptable alternatives to allocate the cost of a long-term asset to expense over the useful life of the asset. In practice, however, most organizations use the straight-line method of depreciation for financial statement presentation and the Modified Accelerated Cost Recovery System (MACRS) for tax reporting purposes because the Internal Revenue Code allows firms to use an accelerated depreciation method on their tax returns, instead of the straight-line method they report under GAAP. Discuss why a company would choose to use straight-line deprecation for financial reporting purposes and an accelerated method for tax purposes. Speculate on why the tax code might allow firms to accelerate depreciation for investments in productive resources.arrow_forwardWhat is depreciation, how is it calculated and how does it relate to the matching principle of accounting? Are there any estimates in depreciation and what are they? Why is it better to use these estimates than to not depreciate at all? What would be the alternatives to depreciation and what kinds of problems do they present? Please think about where we report equipment and similar items on the financial statements.arrow_forward
- One of the main differences between U.S. GAAP and IAS/IFRS is the measurement of property, plant & equipment subsequent to initial recognition. Read IAS 16 and answer the following questions. Provide a list of the references you have used to search this topic. 1) What are the accounting models accepted under IFRS for the measurement of property, plant & equipment subsequent to initial recognition? 2) How often should the company revalue its property, plant & equipment under the revaluation model? 3) How should the revaluation gains and losses be accounted for and reported in the financial statements? 4) How should any claim for compensation from third parties for impairment be accounted for? 5) How should the recoverability of the carrying amount of property, plant & equipment be accounted for?arrow_forwardWhich limitation of an income statement occurs when one company uses an accelerated depreciation method while another company uses straight-line depreciation? O Companies omit from the income statement items they cannot measure reliably. O Income measurement involves judgment. O Income numbers are affected by the accounting methods employed. All of these answer choices are correct.arrow_forwardChoose the correct. What is the appropriate accounting treatment for the value assigned to in-process research and development acquired in a business combination?a. Expense upon acquisition.b. Capitalize as an asset.c. Expense if there is no alternative use for the assets used in the research and development and technological feasibility has yet to be reached.d. Expense until future economic benefits become certain and then capitalize as an asset.arrow_forward
- Which one of the following statements is true? a. Financial statement readers cannot determine whether the depreciation method used by a company is appropriate. b. Financial statement readers can determine the useful lives of assets depreciated during the reported period. c. Financial statement readers cannot determine the depreciation expense for the reported period d. Financial statement readers can accurately estimate the effect an alternative depreciation method would have on income.arrow_forwardWhich of the following statements is (are) correct?a. Accumulated depreciation represents a cash fund beingaccumulated for the replacement of plant assets.b. The cost of a machine includes the cost of repairingdamage to the machine during the installation process.c. A company may use different depreciation methods inits financial statements and its income tax return.d. The use of an accelerated depreciation method causesan asset to wear out more quickly than does use of thestraight-line method.arrow_forwardWhat is the appropriate accounting treatment for the value assigned to in-process research and development acquired in a business combination?a. Expense upon acquisition.b. Capitalize as an asset.c. Expense if there is no alternative use for the assets used in the research and development and technological feasibility has yet to be reached.d. Expense until future economic benefits become certain and then capitalize as an asset.arrow_forward
- Why would companies choose one method of accounting for Depreciation over another method? What are the benefits of each depreciation type?arrow_forwardWhat is depreciation? Why are depreciation methods important in the business arena? Explain the differences among the depreciation methods covered in chapter 10. Based on your evaluation, what is the best method of depreciation and why? What is the least used and Why?arrow_forwardDiscuss the difference between the straight-line method of depreciation and the accelerated methods. Why do companies use different depreciation methods for tax reporting and financial reporting?arrow_forward
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