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Tri-City Ironworks Co. reported $44,500,000 for equipment and $29,800,000 for accumulated depreciation—equipment on its balance sheet. Does this mean (a) that the replacement cost of the equipment is $44,500,000 and (b) that $29,800,000 is set aside in a special fund for the replacement of the equipment? Explain.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 10, Problem 4E
Textbook Problem
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Tri-City Ironworks Co. reported $44,500,000 for equipment and $29,800,000 for accumulated depreciation—equipment on its balance sheet.

Chapter 10, Problem 4E, Tri-City Ironworks Co. reported 44,500,000 for equipment and 29,800,000 for accumulated Does this mean (a) that the replacement cost of the equipment is $44,500,000 and (b) that $29,800,000 is set aside in a special fund for the replacement of the equipment? Explain.

(a)

To determine

Explain whether the reported amount of equipment means that the replacement cost of the equipment is $44,500,000.

Explanation of Solution

Depreciation: It refers to the reduction in the monetary value of fixed tangible assets over its useful life due to its wear and tear or, obsolescence. In other words, it is the method of distributing the cost of tangible fixed assets over its estimated useful life.

No, the reported amount of equipment does not mean that the replacement cost of the equipment is $44,500,000...

(b)

To determine

Explain whether the reported amount of accumulated depreciation $29,800,000 means that it is set aside in a special fund for the replacement of the equipment.

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Chapter 10 Solutions

Financial Accounting
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