Communication Case 11–2 Depreciation • LO11–1 At a recent luncheon, you were seated next to Mr. Hopkins, the president of a local company that manufactures bicycle parts. He heard that you were a CPA and made the following comments to you: Why is it that I am forced to recognize depreciation expense in my company’s income statement when I know that I could sell many of my assets for more than I paid for them? I thought that the purpose of the balance sheet was to reflect the value of my business and that the purpose of the income statement was to report the net change in value or wealth of a company. It just doesn’t make sense to penalize my profits when there hasn’t been any loss in value from using the assets. At the conclusion of the luncheon, you promised to send him a short explanation of the rationale for current depreciation practices. Required: Prepare a letter to Mr. Hopkins. Explain the accounting concept of depreciation and include a brief example in your explanation showing that over the life of the asset the change in value approach to depreciation and the allocation of cost approach will result in the same total effect on income.
Communication Case 11–2 Depreciation • LO11–1 At a recent luncheon, you were seated next to Mr. Hopkins, the president of a local company that manufactures bicycle parts. He heard that you were a CPA and made the following comments to you: Why is it that I am forced to recognize depreciation expense in my company’s income statement when I know that I could sell many of my assets for more than I paid for them? I thought that the purpose of the balance sheet was to reflect the value of my business and that the purpose of the income statement was to report the net change in value or wealth of a company. It just doesn’t make sense to penalize my profits when there hasn’t been any loss in value from using the assets. At the conclusion of the luncheon, you promised to send him a short explanation of the rationale for current depreciation practices. Required: Prepare a letter to Mr. Hopkins. Explain the accounting concept of depreciation and include a brief example in your explanation showing that over the life of the asset the change in value approach to depreciation and the allocation of cost approach will result in the same total effect on income.
Solution Summary: The author explains the four methods of depreciation, which are used to allocate the cost of tangible and intangible assets based on their useful life.
At a recent luncheon, you were seated next to Mr. Hopkins, the president of a local company that manufactures bicycle parts. He heard that you were a CPA and made the following comments to you:
Why is it that I am forced to recognize depreciation expense in my company’s income statement when I know that I could sell many of my assets for more than I paid for them? I thought that the purpose of the balance sheet was to reflect the value of my business and that the purpose of the income statement was to report the net change in value or wealth of a company. It just doesn’t make sense to penalize my profits when there hasn’t been any loss in value from using the assets.
At the conclusion of the luncheon, you promised to send him a short explanation of the rationale for current depreciation practices.
Required:
Prepare a letter to Mr. Hopkins. Explain the accounting concept of depreciation and include a brief example in your explanation showing that over the life of the asset the change in value approach to depreciation and the allocation of cost approach will result in the same total effect on income.
Q.11 concord corporation is contemplating the replacement of an old machine with a new one…
Pls answer number 15 with solutions
An entity is the defendant in a patent infringement lawsuit. The entity’s lawyers believe there is a 30% chance that the court will dismiss the case and the entity will incur no outflow of economic benefits. However, if the court rules in favor of the claimant, the lawyers believe that there is a 20% chance that the entity will be required to pay damages of ₱800,000 (the amount sought by the claimant) and an 80% chance that the entity will be required to pay damages of ₱400,000 (the amount that was recently awarded by the same judge in a similar case). Other outcomes are unlikely.
The court is expected to rule in late December 20x2. There is no indication that the claimant will settle out of court. A 7% risk adjustment factor to the probability-weighted expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 10% per year.
How much is the provision for lawsuit at…
Chapter 6 Question 11
I know the answer is also not -6,792
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