Loose-leaf for Fundamentals of Financial Accounting with Connect
5th Edition
ISBN: 9781259619007
Author: Fred Phillips Associate Professor
Publisher: McGraw-Hill Education
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Chapter 13, Problem 13.6SDC
1.
To determine
To Identify: which financial ratios that is likely to be affected by the difference in the depreciation method.
2.
To determine
To Identify: which company will report the higher amount for each ratio and to explain the reason if they not certain.
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The fact that generally accepted accounting principles allow companies flexibility in choosing between certain allocation methods can
make it difficult for a financial analyst to compare periodic performance from firm to firm.
Suppose you were a financial analyst trying to compare the performance of two companies. Company A uses the double-declining-
balance depreciation method. Company B uses the straight-line method. You have the following information taken from the 12/31/2024
year-end financial statements for Company B:
Depreciation expense
Income Statement
Balance Sheet
Assets:
Plant and equipment, at cost
Less: Accumulated depreciation
Net
You also determine that all of the assets constituting the plant and equipment of Company B were acquired at the same time, and that
all of the $160,000 represents depreciable assets. Also, all of the depreciable assets have the same useful life and residual values are
zero.
Required 1
Required:
1. In order to compare performance with Company A,…
The fact that generally accepted accounting principles allow companies flexibility in choosing
between certain allocation methods can make it difficult for a financial analyst to compare
periodic performance from firm to firm.
Suppose you were a financial analyst trying to compare the performance of two companies.
Company A uses the double-declining-balance depreciation method. Company B uses the
straight-line method. You have the following information taken from the 12/31/2024 year-end
financial statements for Company B:
Income Statement
Depreciation expense
Balance Sheet
Assets:
Plant and equipment, at cost
Less: Accumulated depreciation
Net
$ 13,500
$ 135,000
(54,000)
$ 81,000
You also determine that all of the assets constituting the plant and equipment of Company B
were acquired at the same time, and that all of the $135,000 represents depreciable assets. Also,
all of the depreciable assets have the same useful life and residual values are zero.
In order to compare performance…
The fact that generally accepted accounting principles allow companies flexibility in choosing between certain allocation methods can make it difficult for a financial analyst to compare periodic performance from firm to
firm.
Suppose you were a financial analyst trying to compare the performance of two companies. Company A uses the double-declining-balance depreciation method. Company B uses the straight-line method. You have the
following information taken from the 12/31/2024 year-end financial statements for Company B:
Income Statement
Depreciation expense $ 11,500
Balance Sheet
Assets:
Plant and equipment, at cost
Less: Accumulated depreciation (46,000)
$ 69,000
Net
$ 115,000
You also determine that all of the assets constituting the plant and equipment of Company B were acquired at the same time, and that all of the $115,000 represents depreciable assets. Also, all of the depreciable assets
have the same useful life and residual values are zero.
Required:
1. In order to compare…
Chapter 13 Solutions
Loose-leaf for Fundamentals of Financial Accounting with Connect
Ch. 13 - What is the general goal of trend analysis?Ch. 13 - Prob. 2QCh. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What benchmarks are commonly used for interpreting...Ch. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Slow Cellars current ratio increased from 1.2 to...Ch. 13 - From last year to this year, Colossal Companys...Ch. 13 - From last year to this year, Berry Bam reported...Ch. 13 - Explain whether the following situations, taken...
Ch. 13 - What are the two essential characteristics of...Ch. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - 1. Which of the following ratios is not used to...Ch. 13 - Prob. 2MCCh. 13 - Prob. 3MCCh. 13 - Analysts use ratios to a. Compare different...Ch. 13 - Which of the following ratios incorporates stock...Ch. 13 - Prob. 6MCCh. 13 - Prob. 7MCCh. 13 - A bank is least likely to use which of the...Ch. 13 - Prob. 9MCCh. 13 - (Supplement 13A) Which of the following items is...Ch. 13 - Calculations for Horizontal Analyses Using the...Ch. 13 - Calculations for Vertical Analyses Refer to M13-1....Ch. 13 - Interpreting Horizontal Analyses Refer to the...Ch. 13 - Interpreting Vertical Analyses Refer to the...Ch. 13 - Prob. 13.5MECh. 13 - Prob. 13.6MECh. 13 - Prob. 13.7MECh. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Inferring Financial Information Using the Current...Ch. 13 - Prob. 13.10MECh. 13 - Identifying Relevant Ratios Identify the ratio...Ch. 13 - Prob. 13.12MECh. 13 - Analyzing the Impact of Accounting Alternatives...Ch. 13 - Describing the Effect of Accounting Decisions on...Ch. 13 - Prob. 13.1ECh. 13 - Prob. 13.2ECh. 13 - Prob. 13.3ECh. 13 - Computing Profitability Ratios Use the information...Ch. 13 - Prob. 13.5ECh. 13 - Matching Each Ratio with Its Computational Formula...Ch. 13 - Computing and Interpreting Selected Liquidity...Ch. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Prob. 13.11ECh. 13 - Prob. 13.12ECh. 13 - Prob. 13.13ECh. 13 - Prob. 13.14ECh. 13 - Analyzing the Impact of Alternative Inventory...Ch. 13 - Prob. 13.1CPCh. 13 - Analyzing Comparative Financial Statements Using...Ch. 13 - Prob. 13.3CPCh. 13 - Prob. 13.4CPCh. 13 - Prob. 13.5CPCh. 13 - Prob. 13.6CPCh. 13 - Prob. 13.7CPCh. 13 - Prob. 13.1PACh. 13 - Analyzing Comparative Financial Statements Using...Ch. 13 - Prob. 13.3PACh. 13 - Prob. 13.4PACh. 13 - Interpreting Profitability, Liquidity, Solvency,...Ch. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 13.7PACh. 13 - Prob. 13.1PBCh. 13 - Prob. 13.2PBCh. 13 - Prob. 13.3PBCh. 13 - Prob. 13.4PBCh. 13 - Interpreting Profitability, Liquidity, Solvency,...Ch. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 13.7PBCh. 13 - Prob. 13.1SDCCh. 13 - Prob. 13.2SDCCh. 13 - Prob. 13.5SDCCh. 13 - Prob. 13.6SDCCh. 13 - Prob. 13.7SDCCh. 13 - Prob. 13.1CC
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