Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 10.6CP
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 Respond – Mr. N and Ms. S regarding the maintenance of two set of books, one for tax purposes and another for financial statement purposes.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
A. blue ocean associate is looking to generate income from extra cash. The company purchased an old building, will be restored and sold at a profit. how should blue ocean classify the building on its book?
B. And if blue ocean had bought a lanf for the site of a new office, what depreciation method would you, as its newly hired accountant, suggest it uses for the land?
Depreciation is the reduction in the usable value of fixed assets due to normal wear and tear of time. Depreciation is an indirect non – cash expenditure which is provided on SLM or WDV basis. Rahul is new junior accountant with Hard Work Mills Private Limited he wants to understand normal depreciation differs from additional depreciation. As a tax adviser, guide him on the two concepts and discus the cases where additional depreciation is not allowed
Question.
Depreciation is the reduction in the usable value of fixed assets due to normal wear and tear of time. Depreciation is an indirect non – cash expenditure which is provided on SLM or WDV basis.
Rahul is new junior accountant with Hardwork Mills Private Limited he wants to understand normal depreciation differs from additional depreciation. As a tax adviser, guide him on the two concepts and discus the cases where additional depreciation is not allowed.
Chapter 10 Solutions
Accounting
Ch. 10 - ONeil Office Supplies has a fleet of automobiles...Ch. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Keyser Company purchased a machine that has a...Ch. 10 - Is it necessary for a business to use the same...Ch. 10 - a. Under what conditions is the use of the...Ch. 10 - Prob. 7DQCh. 10 - Immediately after a used truck is acquired, a new...Ch. 10 - For some of the fixed assets of a business, the...Ch. 10 - a. Over what period of time should the cost of a...
Ch. 10 - Straight-line depreciation A building acquired at...Ch. 10 - Straight-line depreciation Equipment acquired at...Ch. 10 - Units-of-activity depreciation A truck acquired at...Ch. 10 - Units-of-activity depreciation A tractor acquired...Ch. 10 - Double declining-balance depreciation A building...Ch. 10 - Double-declining-balance depreciation Equipment...Ch. 10 - Revision of depreciation Equipment with a cost of...Ch. 10 - Revision of depreciation A truck with a cost of...Ch. 10 - Capital and revenue expenditures On February 14,...Ch. 10 - Capital and revenue expenditures On August 7,...Ch. 10 - Sale of equipment Equipment was acquired at the...Ch. 10 - Sale of equipment Equipment was acquired at the...Ch. 10 - Prob. 10.7APECh. 10 - Prob. 10.7BPECh. 10 - Prob. 10.8APECh. 10 - Prob. 10.8BPECh. 10 - Fixed asset turnover ratio Financial statement...Ch. 10 - Fixed asset turnover ratio Financial statement...Ch. 10 - Costs of acquiring fixed assets Melinda Stoffers...Ch. 10 - Prob. 10.2EXCh. 10 - Prob. 10.3EXCh. 10 - Nature of depreciation Tri-City Ironworks Co....Ch. 10 - Straight-line depreciation rates Convert each of...Ch. 10 - Straight-line depreciation A refrigerator used by...Ch. 10 - Depreciation by units-of-activity method A...Ch. 10 - Depreciation by units-of-activity method Prior to...Ch. 10 - Depreciation by two methods A Kubota tractor...Ch. 10 - Depreciation by two methods A storage tank...Ch. 10 - Partial-year depreciation Equipment acquired at a...Ch. 10 - Revision of depreciation A building with a cost of...Ch. 10 - Capital and revenue expenditures US Freight Lines...Ch. 10 - Prob. 10.14EXCh. 10 - Capital and revenue expenditures Quality Move...Ch. 10 - Capital expenditure and depreciation; parital-year...Ch. 10 - Entries for sale of fixed asset Equipment acquired...Ch. 10 - Disposal of fixed asset Equipment acquired on...Ch. 10 - Prob. 10.19EXCh. 10 - Amortization entries Kleen Company acquired patent...Ch. 10 - Book value of fixed assets Apple Inc. designs,...Ch. 10 - Balance sheet presentation List the errors you...Ch. 10 - Fixed asset turnover ratio Amazon.com, Inc. is the...Ch. 10 - Fixed asset turnover ratio Verizon Communications...Ch. 10 - Fixed asset turnover ratio FedEx Corporation and...Ch. 10 - Fixed asset turnover ratio The following table...Ch. 10 - Asset traded for similar asset A printing press...Ch. 10 - Prob. 10.28EXCh. 10 - Entries for trade of fixed asset On July 1, Twin...Ch. 10 - Entries for trade of fixed asset On October 1,...Ch. 10 - Allocating payments and receipts to fixed asset...Ch. 10 - Comparing three depreciation methods Dexter...Ch. 10 - Depreciation by three methods; partial years...Ch. 10 - Depreciation by two methods; sale of fixed asset...Ch. 10 - Transactions for fixed assets, including sale The...Ch. 10 - Amortization and depletion entries Data related to...Ch. 10 - Allocating payments and receipts to fixed asset...Ch. 10 - Comparing three depreciation methods Waylander...Ch. 10 - Depreciation by three methods; partial years...Ch. 10 - Depreciation by two methods; sale of fixed asset...Ch. 10 - Transactions for fixed assets, including sale The...Ch. 10 - Amortization and depletion entries Data related to...Ch. 10 - Ethics in Action Hard Bodies Co. is a fitness...Ch. 10 - Prob. 10.2CPCh. 10 - Communication Godwin Co. owns three delivery...Ch. 10 - Prob. 10.6CP
Knowledge Booster
Similar questions
ou are working with an accounting firm. Sussie, who is representing Suss Co, needs advice about depreciating assets. She asks; what are depreciating assets? What are the different ways to calculate the declining value of depreciating assets? Furthermore, Suss Co has aggregated turnover of $ 2 billion. In December 2021, Suss Co purchased a machine for $4m, which was commenced immediately for an income-producing purpose. What tax does the Suss Co claim?
arrow_forward
Which of the following statements are true?
Select one or more:
a. MACRS must be used for book purposes if it is used for tax purposes.
b. Managers often prefer the straight-line method because it helps to smooth earnings.
c. Units of production method is not appropriate for natural resources.
d. Double-declining balance recognizes more depreciation expense early in an asset's life.
PreviousSave AnswersNext
arrow_forward
Which of the following statements is false?
A
For tax purposes, companies can use the MACRS depreciation method.
B
When you change a depreciation estimate, such as salvage value, you need to make an adjustment to retained earnings.
C
If the expected future cash flow is less than the carrying amount, the asset is considered impaired.
D
If an impairment loss is recorded, depreciation must be recalculated since the book value changed.
The answer A is wrong
arrow_forward
Why do companies choose to accelerate depreciation on their tax return and not on their income statement?
a. to avoid paying taxes
b. to postpone paying taxes
c. to match their GAAP financial statements
arrow_forward
3. Ahmed Company bought a piece of land and decided to sell it in the future at a profit as the value of the land will increase. In which financial statement this land should be reported and which part specifically? Do we need to record depreciation on land
arrow_forward
For each statement in parts a to d, give a short answer or indicate True orFalse. a. Which of the following is a cash flow: (1) depreciation, (2) loan interest paid, and/or (3) income tax. b. We know that depreciation law has changed dramatically since 1950; however, tax law has not changed. (T or F). c. Depreciation method affects taxes owed. (T or F). d. In an alternative evaluation, the inclusion of taxes will change the amount of the measures of merit (e.g., PW or AW), but will not change which alternative is selected as most desirable. (T or F).
arrow_forward
S (Presentation of Property, Plant, and Equipment) Carol Keene, corporate comptroller for Dumaine Industries, is trying to decide how to present “Property, plant, and equipment” in the balance sheet. She realizes that thestatement of cash flows will show that the company made a significant investment in purchasing new equipment this year, but overall she knows the company’s plant assets are rather old. She feels that she can disclose one figure titled “Property, plant, and equipment, net of depreciation,” and the result will be a low figure. However, it will not disclose the age of the assets. If she chooses to show the cost less accumulated depreciation, the age of the assets will be apparent. She proposes the following.
Check the following image
InstructionsAnswer the following questions.(a) What are the ethical issues involved?(b) What should Keene do?
arrow_forward
Discuss 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
1. When the useful life of an asset is more accurately defined in terms of how much it is used rather than the passage of time, the _____ method is used to calculate depreciation.
A. straight-line
B. sum-of-the-years' digits
C. units-of-production
D. declining-balance
2.The name given to tax rules for getting back or recovering through depreciation deductions the cost of property used in a trade or business, or to produce income is known as the _____ Accelerated Cost Recovery System.
A. Municipal
B. Modified
C. Minimum
D. Maximum
arrow_forward
Many companies use an accelerated depreciation method because: A. It is required by the tax code.B. It is required by financial reporting rules.C. It yields larger depreciation expense in the early years of an asset's life.D. It yields a higher income in the early years of the asset's useful life.E. The results are identical to straight-line depreciation.
arrow_forward
The Cost Principle, is an important measurement principle which is used in accounting. Describe the cost principle and discuss what happens if an asset like land has an increase in the fair value. How would the company report the land?
Describe the fair value principle and for what types of assets is the fair value principle used.
Which measurement principle (cost or fair value) do companies use to record most assets?
Example question: Eve Myles Travel Agency purchased land for $90,000 cash on December 1, 2012. On December 31, 2012, the land's value had increased to $95,000. What amount should be reported for land on Eve's balance sheet on December 31, 2012?
arrow_forward
As 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_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
College Accounting, Chapters 1-27 (New in Account...
Accounting
ISBN:9781305666160
Author:James A. Heintz, Robert W. Parry
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
College Accounting, Chapters 1-27 (New in Account...
Accounting
ISBN:9781305666160
Author:James A. Heintz, Robert W. Parry
Publisher:Cengage Learning