a) Darling Paper Container, Inc. purchased several machines at a total cost of $300,000. The installation cost for this equipment was $25,000. The firm plans to depreciate the equipment using the MACRS 5-year normal recovery period. Prepare a depreciation schedule showing the depreciation expense for each year. b) Identify each expense or revenue as a cash flow from operating activities (O), a cash flow from investment activities (I), or a cash flow from financing activities (F). a. Administrative expenses b. Rent payment c. Interest on a note payable d. Interest on a note receivable e. Sale of equipment f. Dividend payment g. Stock repurchase h. Sale of finished goods i. Labor expense j. Sale of a bond issue k. Repayment of a long-term debt l. Selling expenses m. Depreciation expense n. Sale of common stock o. Purchase of fixed assets
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
a) Darling Paper Container, Inc. purchased several machines at a total cost of $300,000. The installation cost for this equipment was $25,000. The firm plans to
b) Identify each expense or revenue as a cash flow from operating activities (O), a cash flow from investment activities (I), or a cash flow from financing activities (F).
a. Administrative expenses
b. Rent payment
c. Interest on a note payable
d. Interest on a note receivable
e. Sale of equipment
f. Dividend payment
g. Stock repurchase
h. Sale of finished goods
i. Labor expense
j. Sale of a bond issue
k. Repayment of a long-term debt
l. Selling expenses
m. Depreciation expense
n. Sale of common stock
o. Purchase of fixed assets
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