Depreciation

or as a noncash (NC) transaction reported in a separate schedule, and (2) represents a cash inflow or cash outflow or has no cash flow effect. Assume use of the indirect approach. Transaction Where Reported Cash Inflow, Outflow, or No Effect? Depreciation expense on the plant assets Noncash (NC) Inflow Paid interest expense. Investing (I) Outflow Cash from a sale of

then this year's profit is reduced $100. The upside is that there's $100 less you'll have to pay taxes on. With capital expenditures, the effect on profit depends on the depreciation schedule you use. With the consistent, "straight-line" method used in the example, your profit gets reduced by an even $3,500 a year. Other depreciation schedules record larger expenses in earlier years, so that business owners can realize the tax savings as early as

December 31, 20x5                   Sales $713,800   Less: Cost of goods sold 323,000   Gross profit $390,800       Less: Selling & administrative expenses $186,000   Depreciation expense 17,000   Interest expense 27,000 230,000       Add: gain on sale of land

Let D(x) represent the deduction for depreciation per money unit of the original capital cost for an asset aged x. Hence, the present value of the whole stream of deductions for depreciation per money unit of the original cost is given by z= ∫_0^∞▒D(x)e –rxdx (1) r denotes the net discount rate. Deduction for depreciation would cut down the firm’s tax charge at time t by τtD(x), hence, the present

of Return Papa Geo’s IRR 28% The calculations was done based upon the data that was provided on the excel spreadsheet. (see spreadsheet for more details) Papa Geo's | Rate of Return |   | Total for equipment | 122,114 | Depreciation | 24,423 | Cash inflows | 3,523,075 | Initial Investment | 992,000 | ARR | 3.53 |   | Initial Investment | 992,000 | Annual Cash Inflows | 3,523,075 | IRR |

vehicle and declare that depreciation plus all auto expenses to the extent of business use, based on mileage. If business miles amount to 60% of total miles, for example, then 60% of all expenses including depreciation would be allowable (IRS , 2012). Either method requires Jane to track her business mileage. The equipment can be depreciated by one of two methods: Section 179 allows for a full write off in the year of acquisition (subject to certain limits). MACRS depreciation allows a systematic write

Comparison of reporting discrepancies between IFRS and GAAP Kaci Amon, Poonam Aujla, Daniel Aurora, Yuanyan Fang, Mark Gonzalez Accounting 306 C1 Professor Xuhong Luo August 12, 2012 Executive Summary The generally accepted accounting principal (GAAP) and international financial reporting standard (IFRS) are standards governing how economic events are reported. In the United States, the Securities and Exchange Commission (SEC) relies on the FASB, the accounting standard-setting body of

Harnischfeger Corp case study 1. Describe clearly the accounting changes Harnischfeger made in 1984 as stated in Note 2 of its financial statements. Note 2 (pg. 17) states that in 1984 Harnischfeger changed their depreciation method that was being used to expense their plants, machinery and equipment from the direct method to the straight-line method for financial reporting purposes. An adjustment of the residual values on certain machinery and equipment was made. Harnischfeger also included

Overall, depreciation changes resulted in an increase of $3.2 million in net income in 1984. • The effect of LIFO inventory liquidation was an increase in 1984 net income by $2.4 million, as gains. The balance sheet also reflected an improvement in liquidity. • The

54.000.000 | | | | | | | | | 4 | 500 | 94.000 | 47.000.000 | | | | | | | | | 5 | 500 | 57.000 | 28.500.000 | | | | | | | | | | | | | | | | | | | | | Annual Depreciation | | | | | | | | | Year | MACRS % | Depreciation | Ending Book Value | | | | | | | | | 1 | 14,29% | 4.644.250 | 27.855.750 | | | | | | | | | 2 | 24,49% | 7.959.250 | 19.896.500 | | | | | | | | | 3 | 17,49%