Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 4.1WUE
Summary Introduction
To calculate: The
Introduction:
The MACRS depreciation (Modified Accelerated Cost Recovery System depreciation).is the standard method of present tax depreciation in Country U.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
(Learning Objectives 3, 4: Compute depreciation; record a gain or loss on disposal)On January 1, 2017, Worldwide Manufacturing purchased a machine for $810,000 that itexpected to have a useful life of four years. The company estimated that the residual value ofthe machine was $50,000. Worldwide Manufacturing used the machine for two years and soldit on January 1, 2019, for $350,000. As of December 31, 2018, the accumulated depreciation onthe machine was $380,000.1. Calculate the gain or loss on the sale of the machinery.2. Record the sale of the machine on January 1, 2019.
E7-22A. (Learning Objective 1: Measure the cost of plant assets) Murphy Self Storagepurchased land, paying $160,000 cash as a down payment and signing a $185,000 note payablefor the balance. Murphy also had to pay delinquent property tax of $2,000, title insurance costing$6,000, and $11,000 to level the land and remove an unwanted building. The company paid$58,000 to add soil for the foundation and then constructed an office building at a cost of $700,000.It also paid $52,000 for a fence around the property, $11,000 for the company sign near theproperty entrance, and $3,000 for lighting of the grounds. What is the capitalized cost of eachof Murphy’s land, land improvements, and building?
Learning Objective 3: Compute partial year depreciation, and select the bestdepreciation method) Assume that on September 30, 2017, EuroAir, an international airlinebased in Germany, purchased a Jumbo aircraft at a cost of €45,000,000 (€ is the symbol for theeuro). EuroAir expects the plane to remain useful for four years (4,000,000 miles) and to havea residual value of €6,000,000. EuroAir will fly the plane 350,000 miles during the remainderof 2017. Compute EuroAir’s depreciation on the plane for the year ended December 31, 2017,using the following methods:a. Straight-lineb. Units-of-productionc. Double-declining-balanceWhich method would produce the highest net income for 2017? Which method produces thelowest net income?
Chapter 4 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 4.1 - Prob. 4.1RQCh. 4.1 - Prob. 4.2RQCh. 4.2 - Briefly describe the first four modified...Ch. 4.2 - Describe the overall cash flow through the firm in...Ch. 4.2 - Prob. 4.5RQCh. 4.2 - 4-B Why is depreciation (as well as amortization...Ch. 4.2 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Learning Goal 5 E4-5 Rimier Corp. forecasts sales...Ch. 4 - Prob. 4.1PCh. 4 - Learning Goal 2 P4-2 Depreciation In early 2019,...Ch. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.11PCh. 4 - Learning Goal 4 P4-12 Cash budget: Advanced The...Ch. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Learning Goal 5 P4-16 Pro forma income statement...Ch. 4 - Learning Goal 5 P4-17 Pro forma income statement:...Ch. 4 - Learning Goal 5 P4-18 Pro forma balance sheet:...Ch. 4 - Learning Goal 5 P4-19 Pro forma balance sheet...Ch. 4 - Learning Goal 5 P4-20 Integrative: Pro forma...Ch. 4 - Learning Goal 5 P4-21 Integrative: Pro forma...Ch. 4 - Prob. 4.22PCh. 4 - Prob. 1SE
Knowledge Booster
Similar questions
- (Learning Objective 3: Compute and record depreciation after a change in usefullife of the asset) Fun Town Amusement Park paid $500,000 for a concession stand. Fun Townstarted out depreciating the building using the straight-line method over 25 years with a residualvalue of zero. After using the concession stand for four years, Fun Town determines that thebuilding will remain useful for only five more years. Record Fun Town’s depreciation on theconcession stand for year five using the straight-line method.arrow_forwardE7-33A. (Learning Objectives 5, 6: Record intangibles, amortization, and impairment)Sweitzer Printers incurred external costs of $400,000 for a patent for a new laser printer.Although the patent gives legal protection for 20 years, it was expected to provide Sweitzerwith a competitive advantage for only ten years due to expected technological advances in theindustry. Sweitzer uses the straight-line method of amortization.After using the patent for five years, Sweitzer learned at an industry trade show that KaytownPrinters has patented a more efficient printer and will be selling this printer next quarter. Becauseof this new information, Sweitzer determined that the expected future cash flows from its patentwere now only $130,000. The fair value of Sweitzer’s patent on the open market was now zero.Requirements1. Write the journal entries to record (a) the purchase of the patent and (b) amortization for year 1.2. Once Sweitzer learned of the competing printer and adjusted the expected…arrow_forward(Learning Objectives 5, 6: Record intangibles, amortization, and impairment)1. Milton Printers incurred external costs of $700,000 for a patent for a new laser printer.Although the patent gives legal protection for 20 years, it was expected to provide Miltonwith a competitive advantage for only eight years due to expected technological advancesin the industry. Milton uses the straight-line method of amortization.2. After using the patent for four years, Milton learned at an industry trade show thatAnderson Printers has patented a more efficient printer and will begin selling the newprinter next quarter. Because of this new information, Milton determined that the expectedfuture cash flows from its patent were now only $270,000. The fair value of Milton’spatent on the open market was now zero.Requirements1. Write the journal entries to record (a) the purchase of the patent and (b) amortization for year 1.2. Once Milton learned of the competing printer and adjusted the expected future…arrow_forward
- (Learning Objectives 1, 3, 4: Measure a plant asset’s cost; calculate UOP depreciation; analyze the effect of a used asset trade-in) Concord Truck Company is a large truckingcompany. The company uses the units-of-production (UOP) method to depreciate its trucks.To follow are facts about one Mack truck in the company’s fleet. When this truck wasacquired in 2018, the tractor-trailer rig had cost $420,000 and was expected to remain in servicefor 10 years or 1,000,000 miles. Its estimated residual value was $100,000. During 2018, the truckwas driven 77,000 miles; during 2019, 175,000 miles; and during 2020, 190,000 miles. After thetruck was driven 45,000 miles in 2021, the company traded in the Mack truck for a Freightlinertruck with a fair market value of $270,000. In addition to the trade-in of the Mack truck, ConcordTruck Company paid cash of $31,000 for the Freightliner truck. Determine Concord’s gain or losson the transaction. Prepare the journal entry to record the trade-in of the…arrow_forward(Learning Objective 3: Compute depreciation using double-declining-balance methodwith a residual value of zero) Using the double-declining-balance method of depreciation,calculate the following amounts for the car for each of the four years of its expected life:a. Depreciation expenseb. Accumulated depreciation balancec. Book valueThe following data should be used for S7-10 through S7-12.FlavorRite purchased a used van for use in its business on January 1, 2017. It paid $17,000for the van. FlavorRite expects the van to have a useful life of four years, with an estimatedresidual value of $1,400. FlavorRite expects to drive the van 16,000 miles during 2017, 19,000miles during 2018, 17,000 miles in 2019, and 48,000 miles in 2020, for total expected miles of100,000.arrow_forward(Learning Objective 3: Determine depreciation amounts by three methods) PresleyPizza bought a used Ford delivery van on January 2, 2018, for $22,000. The van was expected toremain in service for four years (80,000 miles). At the end of its useful life, Presley managementestimated that the van’s residual value would be $2,000. The van traveled 32,000 miles the firstyear, 28,000 miles the second year, 15,000 miles the third year, and 5,000 miles in the fourth year.Requirements1. Prepare a schedule of depreciation expense per year for the van under the threedepreciation methods discussed in this chapter. (For units-of-production and doubledeclining-balance methods, round to the nearest two decimal places after each step of thecalculation.)2. Which method best tracks the wear and tear on the van?3. Which method would Presley prefer to use for income tax purposes? Explain yourreasoning in detail.arrow_forward
- (Learning Objective 3: Change a plant asset’s useful life) Chester Consultantspurchased a building for $430,000 and depreciated it on a straight-line basis over 40 years. Theestimated residual value was $70,000. After using the building for 20 years, Chester realizedthat the building would remain useful only 14 more years. Starting with the 21st year, Chesterbegan depreciating the building over the newly revised total life of 34 years and decreasedthe estimated residual value to $12,980. Record depreciation expense on the building foryears 20 and 21.arrow_forward(Learning Objective 3: Compute depreciation and book value by three methods—firstyear only) On January 1, 2017, Northeast Transportation Company purchased a used aircraftat a cost of $58,900,000. Northeast expects the plane to remain useful for five years(7,200,000 miles) and to have a residual value of $4,900,000. Northeast expects to fly the plane750,000 miles the first year, 1,375,000 miles each year during the second, third, and fourthyears, and 2,325,000 miles the last year.1. Compute Northeast’s depreciation for the first two years on the plane using the followingmethods:a. Straight-line methodb. Units-of-production method (round depreciation per mile to the closest cent)c. Double-declining-balance method2. Show the airplane’s book value at the end of the first year under each depreciation method.arrow_forwardVision-guided robotics equipment used to improve efficiency and purity when manufacturing food products is purchased for $1,200,000. It is expected to have a useful life of 10 years and is MACRS-GDS 7-year property. Determine the depreciation taken and book value at the end of year 8 if 50% bonus depreciation is used. a. $53,520 and $0 b. $26,760 and $0 c. $53,520 and $26,760 d. $26,760 and $26,760.arrow_forward
- (Learning Objectives 1, 3, 4: Measure a plant asset’s cost; calculate UOPdepreciation; analyze the effect of a used asset trade-in) Canyon Truck Company is a largetrucking company. The company uses the units-of-production (UOP) method to depreciate itstrucks.To follow are facts about one Mack truck in the company’s fleet. When this truck wasacquired in 2018, the tractor-trailer had cost $450,000 and was expected to remain in servicefor 10 years or 1,000,000 miles. Its estimated residual value was $20,000. During 2018, thetruck was driven 80,000 miles; during 2019, 175,000 miles; and during 2020, 185,000 miles.After the truck was driven 40,000 miles in 2021, the company traded in the Mack truck fora Freightliner truck with a fair market value of $250,000. In addition to the trade-in of theMack truck, Canyon paid cash of $30,000 for the Freightliner truck. Determine Canyon’s gainor loss on the transaction. Prepare the journal entry to record the trade-in of the old truck for thenew one.…arrow_forward(Learning Objective 3: Determine depreciation amounts by three methods) LimaPizza bought a used Toyota delivery van on January 2, 2018, for $18,600. The van wasexpected to remain in service for four years (57,000 miles). At the end of its useful life, Limamanagement estimated that the van’s residual value would be $1,500. The van traveled 20,500miles the first year, 16,000 miles the second year, 15,400 miles the third year, and 5,100 milesin the fourth year.Requirements1. Prepare a schedule of depreciation expense per year for the van under the three depreciationmethods discussed in this chapter. (For units-of-production and double-declining-balancemethods, round to the nearest two decimal places after each step of the calculation.)2. Which method best tracks the wear and tear on the van?3. Which method would Lima prefer to use for income tax purposes? Explain your reasoningin detail.arrow_forward(Learning Objective 3: Change a plant asset’s useful life) Fresno Consultantspurchased a building for $440,000 and depreciated it on a straight-line basis over 40 years. Theestimated residual value was $82,000. After using the building for 20 years, Fresno realized thatthe building would remain useful only 14 more years. Starting with the 21st year, Fresno begandepreciating the building over a revised total life of 34 years and decreased the residual value to$14,600. Record depreciation expense on the building for years 20 and 21.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,