Financial Accounting - Access
4th Edition
ISBN: 9781259958533
Author: SPICELAND
Publisher: MCG
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Chapter 7, Problem 7.7APWC
Written Communication
At a recent luncheon, you were seated next to Mr. Fogle, the president of a local company that manufactures food processors. He heard that you were in a financial accounting class and asked:
“Why is it that I’m forced to record
At the conclusion of the luncheon, you promised to send him a short explanation of the rationale for current depreciation practices.
Required:
Prepare a memo to Mr. Fogle. Explain the accounting concept of depreciation and contrast this with the dictionary definition of depreciation.
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Students have asked these similar questions
At a recent luncheon, you were seated next to Mr. Fogle, the president of a local company that manufactures food processors. He heard that you were in a financial accounting class and asked:“Why is it that I’m forced to record depreciation expense on my property when I could sell it for more than I originally paid? I thought that the purpose of the balance sheet is to reflect the value of my business and that the purpose of the income statement is to report the net change in value or wealth of a company. It just doesn’t make sense to penalize my profits when the building hasn’t lost any value.”At the conclusion of the luncheon, you promised to send him a short explanation of the rationale for current depreciation practices.Required:Prepare a memo to Mr. Fogle. Explain the accounting concept of depreciation and contrast this with the dictionary definition of depreciation.
Direction: Read the following case study and answer the question:
During the period, the business acquires an equipment costing P150,000 in cash. The owner of the business is questioning why you as his accountant, did not include the P150,000 equipment as one of the items of operating expense in the income statement which resulted in a higher income tax of the business?
You have been appointed as an accountant of M.K. Industries a company formed by Mr Mutiso and Mr K.Kyalo to manufacture cooking fats for sale. While reviewing the accounting records of the company, you discovered that the following transactions and events were recorded during the year ending 30 September 1993.
(i) Land was reported at its estimated selling price, which is substantially higher than its cost. The increase in value was included in the income statement.
(ii) The personal assets of M.Mutiso and K.Kyalo are not included in the financial statements of the business although M.Mutiso and K.Kyalo are agreeable to guaranteeing the bank overdraft of the business.
Required:
For each of the above items, explain which basis of accounting principle(s), concept(s) or convection(s), if any, are violated or observed. In each case, indicate the correct treatment.
Chapter 7 Solutions
Financial Accounting - Access
Ch. 7 - Prob. 1RQCh. 7 - What are the two major categories of long-term...Ch. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 6RQCh. 7 - Equipment includes machinery used in manufacturing...Ch. 7 - Prob. 8RQCh. 7 - Prob. 9RQCh. 7 - Prob. 10RQ
Ch. 7 - Prob. 11RQCh. 7 - How do we decide whether to capitalize (record as...Ch. 7 - Explain the usual accounting treatment for repairs...Ch. 7 - Prob. 14RQCh. 7 - How is the dictionary definition different from...Ch. 7 - What factors must we estimate in allocating the...Ch. 7 - Prob. 17RQCh. 7 - Prob. 18RQCh. 7 - Prob. 19RQCh. 7 - Assume that Little King Sandwiches uses...Ch. 7 - Assume Little King Sandwiches depreciates a...Ch. 7 - Prob. 22RQCh. 7 - Prob. 23RQCh. 7 - What is book value? How do we compute the gain or...Ch. 7 - Prob. 25RQCh. 7 - Prob. 26RQCh. 7 - Prob. 27RQCh. 7 - Prob. 28RQCh. 7 - Determine the initial cost of land (LO71) Fresh...Ch. 7 - Prob. 7.2BECh. 7 - Prob. 7.3BECh. 7 - Compute research and development expense (LO72)...Ch. 7 - Prob. 7.5BECh. 7 - Explain the accounting definition of depreciation...Ch. 7 - Prob. 7.7BECh. 7 - Prob. 7.8BECh. 7 - Prob. 7.9BECh. 7 - Account for the sale of long-term assets (LO76)...Ch. 7 - Account for the exchange of long-term assets...Ch. 7 - Account for the exchange of long-term assets...Ch. 7 - Prob. 7.13BECh. 7 - Determine the impairment loss (LO78) Vegetarian...Ch. 7 - Prob. 7.15BECh. 7 - McCoys Fish House purchases a tract of land and an...Ch. 7 - Orion Flour Mills purchased a new machine and made...Ch. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Prob. 7.8ECh. 7 - Prob. 7.9ECh. 7 - Determine depreciation for the first year under...Ch. 7 - Deformine depreciation under three methods (LO74)...Ch. 7 - Determine straight-line depreciation for partial...Ch. 7 - Determine straight-line depreciation for partial...Ch. 7 - Prob. 7.14ECh. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Record the sole of equipment (L076) Abbott...Ch. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - Complete the accounting cycle using long-term...Ch. 7 - The Italian Bread Company purchased land as a...Ch. 7 - Prob. 7.2APCh. 7 - Prob. 7.3APCh. 7 - Prob. 7.4APCh. 7 - Determine depreciation under three methods (LO74)...Ch. 7 - Prob. 7.6APCh. 7 - Compute depreciation, amortization, and book value...Ch. 7 - Prob. 7.8APCh. 7 - Calculate and interpret ratios (LO77) Sub Station...Ch. 7 - Calculate and interpret ratios (LO77) University...Ch. 7 - Prob. 7.1BPCh. 7 - Determine the acquisition cost of equipment (LO71)...Ch. 7 - Prob. 7.3BPCh. 7 - Prob. 7.4BPCh. 7 - Determine depreciation under three methods (LO74)...Ch. 7 - Prob. 7.6BPCh. 7 - Prob. 7.7BPCh. 7 - Record the disposal of equipment (LO76) Flip Side...Ch. 7 - Calculate and Interpret ratios (LO77) Papas Pizza...Ch. 7 - Calculate and interpret ratios (LO77) Barry...Ch. 7 - Prob. 7.1APCPCh. 7 - Prob. 7.2APFACh. 7 - Prob. 7.3APFACh. 7 - Prob. 7.4APCACh. 7 - Prob. 7.5APECh. 7 - Written Communication At a recent luncheon, you...Ch. 7 - Earnings Management Edward L. Vincent is CFO of...
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