Part A On 1 July 2011‚ Kookaburra Ltd acquired an item of plant at a cost of $200 000. The plant has an expected useful life of eight years‚ and Kookaburra Ltd adopts the straight-line method of deprecation. The tax depreciation rate for this type of plant is 25%. The company tax rate is 30%. Kookaburra Ltd measures plant at fair value. At 30 June 2012‚ Kookaburra Ltd determines the fair value of the plant to be $186 000. Due to recent developments in plant technology‚ the remaining useful
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From: WGU Student Date: 3/23/14 Re: Depreciation Method Recommendations The calculation of the straight line method of depreciation is by taking the cost of the item minus its salvage value then dividing that figure by the expected year’s life cycle of the item. This is a non complex calculation and it reduces net income and the equal amounts of depreciation are deducted from every life cycle year of the item. The double declining balance method of depreciation is calculated at double or 200% for
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reject the project. d. Yes‚ the annual depreciation expense must be taken into account when calculating the cash flows related to a given project. While depreciation is not a cash expense that directly affects cash flow‚ it decreases a firm’s net income and hence‚ lowers its tax bill for the year. Because of this depreciation tax shield‚ the firm has more cash on hand at the end of the year than it would have had without expensing depreciation. e. No‚ dividend payments should not
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accordingly within companies’ jurisdiction. In some cases‚ companies are required to keep two sets of accounting records. For example‚ publicly traded companies are required to use GAAP by the U.S. Securities and Exchange Commission. But GAAP and IFRS depreciation rules don ’t always match up. Companies routinely account for earnings and expenses differently on their annual reports‚ compared with their tax returns . A contributing factor to keeping separate records is the different treatment in measuring
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and Management 2012” May 10-11‚ 2012‚ Vilnius‚ LITHUANIA ISSN 2029-4441 print / ISSN 2029-929X online ISBN 978-609-457-116-9 CD doi:10.3846/bm.2012.036 http://www.bm.vgtu.lt © Vilnius Gediminas Technical University‚ 2012 THE INFLUENCE OF DEPRECIATION POLICIES ON FINANCIAL STATEMENT ANALYSIS: A CASE STUDY OF AIRLINE INDUSTRY Xiaosong Zheng1‚ 2‚ Yingya Guo3‚ Jiali Xu4 Tallinn School of Economics and Business Administration‚ Tallinn University of Technology‚ 19086 Tallinn‚ Estonia Email: xiaosong
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1- Multiple Choice Question 214 A company has the following assets: Buildings and Equipment‚ less accumulated depreciation of $2‚000‚000 $ 7‚600‚000 Copyrights 960‚000 Patents 4‚000‚000 Timberlands‚ less accumulated depletion of $2‚800‚000 4‚800‚000 The total amount reported under Property‚ Plant‚ and Equipment would be $16‚400‚000. $13‚360‚000. $12‚400‚000. $17‚360‚000. 2- Multiple Choice Question 144 Expenditures that maintain the operating efficiency and expected productive life
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Chapter 12 Analyzing Project Cash Flows 12-1. Captain’s Cereal’s new Crunch Stuff n’ Stars is expected to generate $25M in sales. However‚ 20% of that will be cannibalized from the original cereal‚ Crunch Stuff. Thus‚ the sales amount that should be allocated to the new Stars version is only (100% − 20%) of the $25M‚ or $20M. This is an example of finding an “incremental” cash flow. As shown in equation 12-1‚ we only want to consider what is different if we go ahead with the project: incremental
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The time an asset is expected to last is called its a. depreciation. b. fiscal period. c. net loss value. d. useful life. ANS: D DIF: Easy OBJ: LO 5-1 MSC: AACSB Communication 6. Matching the cost of an asset with the revenue it is expected to produce is called a. adjusting. b. expensing. c. depreciation. d. contra-valuing. ANS: C DIF: Easy OBJ: LO 5-1 MSC: AACSB Communication 7. The cost of an asset that is subject to depreciation is called a. salvage value. b. depreciable cost. c. revenue
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Chart Year 1 2 3 4 5 Sales Volume 1400 1525 1730 1650 1420 Sales Revenue 8.680 9.455 10.726 10.230 8.804 Variable Costs 3.906 4.255 4.827 4.604 3.962 Fixed Costs 2.1 2.1 2.1 2.1 2.1 Total Costs 6.006 6.355 6.927 6.704 6.062 Depreciation Case 1 1.343 2.302 1.644 Depreciation Case 2 1.343 2.302 1.644 1.174 0.839 (The unit of the price is million) Step 1 In this case‚ it seems to be an important decision for XYZ Bicycle Co. Ltd to determine whether to introduce the new mountain bike.
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Balls and Bats‚ Inc. made a purchase of equipment. The cost of the equipment was one hundred thousand dollars and had life expectancy of four years. The following schedules are the double-declining balance method and the straight line method of depreciation. This schedule will assist Balls and Bats‚ Inc determine the best method to depreciate there new acquisition. Further‚ the schedules will determine which will glean a higher net income for the organization for the year ending December 31‚ 2005
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