If total liabilities decreased by $25,000 during a period of time and owner's equity increased by $30,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is…
The investment is assigned a depreciation schedule that is used throughout the investments lifecycle. The investment is assignment a depreciation schedule that provides for the same amount of tax credits over the life span of the investment regardless of the depreciation schedule assigned. This method allows for better financial planning and consistent tax credits. The modified accelerated cost recovery system depreciation provides for reduced tax liabilities in the beginning however the depreciation schedule that is used changes year to year. This method does not provide for consistent financial planning (Emery, Finnerty, & Stowe,…
Although depreciation is a non-cash expense, it does affect the level of the differential cash flow, because it is a tax-deductible expense. The higher the depreciation expense, the lower the firms profits will be. (Keown Martin, Petty 11)…
D2: A variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the…
Assuming that a straight-line method will be used, depreciation expenses will be more realistic. The change will increase profits by $3.2 million or $.27 per share, but reduces them in future profits to…
1. Which of the following combinations correctly describes the relationship between foreign currency transactions, exchange rate changes, and foreign exchange gains and losses?…
The first adjustment increases income because interest is not being expensed immediately but instead is capitalized as part of the cost of the asset to which it relates. The second adjustment decreases income because under Country A GAAP, the asset to which interest is capitalized has a larger cost and therefore a larger depreciation expense.…
3. What is the effect of the depreciation lives change? How will this change affect future reported profits?…
Because of the change method of the depreciation from a straight line to the accelerated, therefore, there is recognition of a more depreciation expense up front and there is no decrease that is experienced. There is also a decrease in the ESP ratio.…
Week three was highlighted by the discussion of fixed assets and the use of accounting for depreciation of those assets. Businesses utilize depreciation of their fixed assets to take advantage of the tax breaks that they receive. The cost of depreciation of assets lowers the taxable income of a company and in turn allows either a higher refund or less owed in taxes. Another option that is available is the use of accelerated depreciation. This option allows for companies to accelerate the depreciation of assets to a current year's return to gain a higher tax break. The use of this tool is usually implemented in times of economic turmoil to stimulate the economy.…
The concept and practice of depreciation and depletion play an integral part in a company 's cash flow and profit or loss statements. Depreciation, according to investopedia is a method of allocating the cost of a tangible asset over its useful life. Depletion is very similar to depreciation with very subtle differences, the first one being what is depreciated verses depleted. All assets (except land) are depreciated but the assets with natural resources are depleted. The methods on how depreciation and depletion are calculated vary as well. Each will be visited in this essay.…
Advanced Accounting Mock Exam 2011-2012 Use these questions to prepare for your exam coming soon. This is not guarantee that the exam will be similar except the fact that the exam will also have multiple choice questions. Question 1: An analyst evaluating financial statements for various firms is most likely to conclude that: a) U.S. GAAP ensures uniformity in accounting practices among different firms. b) Firms account for their debt obligations in the liabilities section of the income statement. c) Notes to the financials should be used to get further detail on financial statement balances. d) Management discussion is more useful than Notes to financial statements Question 2: Which of the following statements regarding the International Accounting Standards Board (IASB) is correct? a) The IASB is an independent standard setting body with the responsibility to advance the process of global harmonization of accounting standards. b) The standards issued by the IASB are called "Statements on Standards for International Financial Reporting." c) The IASB requires member countries to adopt the International Financial Reporting Standards. d) IFRS is rules-based while US GAAP is principles-based Question 3: Upon reviewing a firm's most recent financial statements an analyst is least likely to use the: a) Income statement to calculate and evaluate the firm's profit margins over the past year. b) Balance sheet to compare the book value of the firm's common stock to its market value. c) Income statement to discern the current and prior year status of the firm's debts and holdings. d) Cash Flow Statement to assess profitability next year Question 4: The Rotor Corporation has a pretax profit margin of 20%, an asset turnover of 1.8, and a financial leverage ratio of 2.5. If Rotor's effective income tax rate is 30%, what is its return on equity? a) b) c) d) 27.0% 35.0% 63.0% 32.78%…
The estimated depreciation lives on certain U.S. plants, machinery and equipment and residual values on certain machinery and equipment was changed, which increased net income by $3.2 million…
Q2-1 (a) An investment in the voting common stock of another company is reported on an equity-method basis when the investor is able to significantly influence the operating and financial policies of the investee.…
3. On March 1, 1998, the company sold for $2,336 cash an automobile that was recorded on the books at a cost of $8,354 and had an accumulated depreciation of $5,180, giving a net book value of $3,174 as of January 1, 1998. In this and other cases of the sale of long-lived assets during the year, the accumulated depreciation and depreciation expense items were both increased by an amount that reflected the depreciation chargeable for the months in 1998 in which the asset was held prior to the sale, at rates listed in 7 below.…