During 2018, Starbucks purchased fixed assets costing approximately$1.8 billion. Assume that the company purchased the assets at thebeginning of the year, uses straight-line depreciation, and normallydepreciates its equipment over four years. Assume a zero salvage value.a. Compute the book value of the equipment at the end of each ofthe four years.b. Complete a chart like the following.2018 2019 2020 2021 TotalDepreciation expense (in millions) Cashoutflow associated with purchase ofequipment (in millions) The following information is available for M&M Johnson Inc.:The December 31, 2020, supplies inventory balance is $85,000. A count of supplies reveals that thecompany actually has $30,000 of supplies on hand.а.b. As of December 31, 2020, Johnson Inc. had not paid the rent for December. The monthly rent is$2,400.On December 20, 2020, Johnson collected $18,000 in customer advances for the subsequentperformance of a service. Johnson recorded the $18,000 as unearned revenue, and as of December 31two-thirds of the service had been performed.С.d. The total cost of Johnson's fixed assets is $500,000. Johnson estimates that the assets have a usefullife of ten years with zero salvage value and uses the straight-line method of depreciation.Johnson borrowed $10,000 at an annual rate of 12 percent on July 1, 2020. The first interest paymentwill be made on January 1, 2021.е.f.Johnson placed several ads in local newspapers during December. On December 31, the companyreceived a $28,000 bill for the ads, which was not recorded at the time the company placed the ads.On July 1, 2020, Johnson paid the premium for a one-year life insurance policy. The $350 cost of thepremium was capitalized as an asset when paid.g.After creating an adjusting entry, what is the amount of Supplies Expense, depreciation expense,interest expense, and insurance expense?

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Description: During 2018, Starbucks purchased fixed assets costing approximately$1.8 billion. Assume that the company purchased the assets at thebeginning of the year, uses straight-line depreciation, and normallydepreciates its equipment over four years. Assume

Depreciation is an accounting method for allocating the cost of a tangible or physical asset over…

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During 2018, Starbucks purchased fixed assets costing approximat $1.8 billion. Assume that the company purchased the assets at the beginning of the year, uses straight-line depreciation, and normall depreciates its equipment over four years. Assume a zero salvage a. Compute the book value of the equipment at the end of eac the four years.

During 2018, Starbucks purchased fixed assets costing approximat $1.8 billion. Assume that the company purchased the assets at the beginning of the year, uses straight-line depreciation, and normall depreciates its equipment over four years. Assume a zero salvage a. Compute the book value of the equipment at the end of eac the four years.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

Topic Video

Question

During 2018, Starbucks purchased fixed assets costing approximately
$1.8 billion. Assume that the company purchased the assets at the
beginning of the year, uses straight-line depreciation, and normally
depreciates its equipment over four years. Assume a zero salvage value.
a. Compute the book value of the equipment at the end of each of
the four years.
b. Complete a chart like the following.
2018 2019 2020 2021 Total
Depreciation expense (in millions) Cash
outflow associated with purchase of
equipment (in millions)

The following information is available for M&M Johnson Inc.:
The December 31, 2020, supplies inventory balance is $85,000. A count of supplies reveals that the
company actually has $30,000 of supplies on hand.
а.
b. As of December 31, 2020, Johnson Inc. had not paid the rent for December. The monthly rent is
$2,400.
On December 20, 2020, Johnson collected $18,000 in customer advances for the subsequent
performance of a service. Johnson recorded the $18,000 as unearned revenue, and as of December 31
two-thirds of the service had been performed.
С.
d. The total cost of Johnson's fixed assets is $500,000. Johnson estimates that the assets have a useful
life of ten years with zero salvage value and uses the straight-line method of depreciation.
Johnson borrowed $10,000 at an annual rate of 12 percent on July 1, 2020. The first interest payment
will be made on January 1, 2021.
е.
f.
Johnson placed several ads in local newspapers during December. On December 31, the company
received a $28,000 bill for the ads, which was not recorded at the time the company placed the ads.
On July 1, 2020, Johnson paid the premium for a one-year life insurance policy. The $350 cost of the
premium was capitalized as an asset when paid.
g.
After creating an adjusting entry, what is the amount of Supplies Expense, depreciation expense,
interest expense, and insurance expense?

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