Depreciation and Income Statement
Ciclon de alicante
How to win outside the soccesfield
Content
The absolute goal of Ciclón de Alicante is to become a major soccer club in Spain.
But how?
The stadium
• Q: What is the impact of the sale of the stadium transaction on Ciclón’s 2003 Income Statement and Statement of Cash Flows (under the Indirect Method), and on its Balance Sheet for the year ended on December 31th, 2003? Items to be addressed cash payment of $ 100 million cost of building the new stadium was $ 20 million market value of the land was $ 12 million the book value of the old stadium was $ 1 million useful live of the stadium was 40 years demolition cost at end useful live estimated $ 5 million (I take it as estimated $ 5 mio in 2043).
Sale of old stadium
(millions)
The deal (an investment activity):
Ciclón received in the deal - cash payment - land - the new stadium (building cost) Ciclón provided in the deal - the old stadium book value $ 100 $ 12 $ 20 $ 132 $ 1
Total gain of sale of long time asset
$ 131
PM For the obligation to demolition cost Colón can create a provision of $ 5 mio to be built over 40 years ($ 0.125 a year). Therefore it is no part in the calculation of gain of this deal.
Income Statement 2003
(stadium, year ended December 31, millions)
Operating activities yearly deprecation expense new stadium with value of $ 20 mio and depreciated in 40 years. adding to provision demolition expense $ 5 mio to be paid in 2043 divided over 40 years income from operating activities Investing activities gain of sale of the stadium in 2003 Total impact stadium on Income Statement 2003
($ ($ ($
0.5) 0.125) 0.625)
$ 131
$ 130.375
Cash Flows 2003
(stadium, year ended December 31, Indirect Method, millions) To come to total Cash Flows the adjustments are: adjustment depreciation expense adjustment for provision demolition expense adjustment investment land adjustment investment new stadium adjustment disinvestment old stadium $ 0.5 $ 0.125 ($ 12)
How to win outside the soccesfield
Content
The absolute goal of Ciclón de Alicante is to become a major soccer club in Spain.
But how?
The stadium
• Q: What is the impact of the sale of the stadium transaction on Ciclón’s 2003 Income Statement and Statement of Cash Flows (under the Indirect Method), and on its Balance Sheet for the year ended on December 31th, 2003? Items to be addressed cash payment of $ 100 million cost of building the new stadium was $ 20 million market value of the land was $ 12 million the book value of the old stadium was $ 1 million useful live of the stadium was 40 years demolition cost at end useful live estimated $ 5 million (I take it as estimated $ 5 mio in 2043).
Sale of old stadium
(millions)
The deal (an investment activity):
Ciclón received in the deal - cash payment - land - the new stadium (building cost) Ciclón provided in the deal - the old stadium book value $ 100 $ 12 $ 20 $ 132 $ 1
Total gain of sale of long time asset
$ 131
PM For the obligation to demolition cost Colón can create a provision of $ 5 mio to be built over 40 years ($ 0.125 a year). Therefore it is no part in the calculation of gain of this deal.
Income Statement 2003
(stadium, year ended December 31, millions)
Operating activities yearly deprecation expense new stadium with value of $ 20 mio and depreciated in 40 years. adding to provision demolition expense $ 5 mio to be paid in 2043 divided over 40 years income from operating activities Investing activities gain of sale of the stadium in 2003 Total impact stadium on Income Statement 2003
($ ($ ($
0.5) 0.125) 0.625)
$ 131
$ 130.375
Cash Flows 2003
(stadium, year ended December 31, Indirect Method, millions) To come to total Cash Flows the adjustments are: adjustment depreciation expense adjustment for provision demolition expense adjustment investment land adjustment investment new stadium adjustment disinvestment old stadium $ 0.5 $ 0.125 ($ 12)