Early in January 2019, Tellco Inc. acquired a new machine and incurred $11,000 of interest, installation, and overhead costs that should have been capitalized but were expensed. The company earned net operating income of $89,000 on average total assets of $782,000 for 2019. Assume that the total cost of the new machine will be depreciated over 10 years using the straight-line method. Required: a. Calculate the ROI for Tellco for 2019. b. Calculate the ROI for Tellco for 2019, assuming that the $11,000 had been capitalized and depreciated over 10 years using the straight-line method. (Hint: There is an effect on net operating income and average assets.) c. Given your answers to parts a and b. why would the company want to account for this expenditure as an expense? d. Assuming that the $11,000 is capitalized, what will be the effect on ROI for 2020 and subsequent years, compared to expensing the interest, installation, and overhead costs in 2019? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Calculate the ROI for Tellco for 2019. (Round your answer to 1 decimal place.)

Early in January 2019, Tellco Inc. acquired a new machine and incurred $11,000 of interest, installation, and overhead costs that should have been capitalized but were expensed. The company earned net operating income of $89,000 on average total assets of $782,000 for 2019. Assume that the total cost of the new machine will be depreciated over 10 years using the straight-line method. Required: a. Calculate the ROI for Tellco for 2019. b. Calculate the ROI for Tellco for 2019, assuming that the $11,000 had been capitalized and depreciated over 10 years using the straight-line method. (Hint: There is an effect on net operating income and average assets.) c. Given your answers to parts a and b. why would the company want to account for this expenditure as an expense? d. Assuming that the $11,000 is capitalized, what will be the effect on ROI for 2020 and subsequent years, compared to expensing the interest, installation, and overhead costs in 2019? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Calculate the ROI for Tellco for 2019. (Round your answer to 1 decimal place.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

b) Presented below are selected transactions for Solidago Berhad for 2021. Received RM3,000 scrap value on retirement of machinery that was purchased on January 1, 2010. The machine cost RM90,000 on that date, and had a useful life of 10 years with no residual value. Jan 1 April 30 Sold a machine for RM31,000 that was purchased on January 1, 2018. The machine cost RM90,000, and had a useful life of 5 years with no residual value. Discarded a business automobile that was purchased on April 1, 2017. The car cost RM42,000 and was depreciated on a 5-year useful life with a residual value of RM2,000. Dec 31 Required: Journalize all entries required as a result of the above transactions. Solidago Berhad uses the straight-line method of depreciation and has recorded depreciation through December 31 2020
On March 31, 2021, Canseco Plumbing Fixtures purchased equipment for $32,000. Residual value at the end of an estimated four-year service life is expected to be $8,000. The company expects the equipment to operate for 20,000 hours. The equipment operated for 2,300 and 3,100 hours in 2021 and 2022, respectively.Required:a. Calculate depreciation expense for 2021 and 2022 using straight-line method.b. Calculate depreciation expense for 2021 and 2022 using double-declining-balance method.c. Calculate depreciation expense for 2021 and 2022 using units-of-production using hours operated.
At the beginning of 2019, Robotics Inc. acquired a manufacturing facility for $13.9 million. $10.9 million of the purchase price was allocated to the building. Depreciation for 2019 and 2020 was calculated using the straight-line method, a 25-year useful life, and a $2.9 million residual value. In 2021, the estimates of useful life and residual value were changed to 20 total years and $690,000, respectively. What is depreciation on the building for 2021? (Round answer to the nearest whole dollar.) Depreciation
On January 1, 2021, a machine was installed at Gallagher Factory at a cost of $52,000. Its estimated residual value at the end of its estimated life of 4 years is $20,000. The machine is expected to produce 128,000 units with the following production schedule: View the production schedule. Complete depreciation schedules for (a) straight-line, (b) units-of-production, and (c) double declining-balance at twice the straight-line rate. (a) Complete the depreciation schedule using the straight-line method. End of Year Cost of Equipment Yearly Depreciation Expense Accumulated Depreciation, End of Year Book Value, End of Year 2021 2022 2023 2024 - ☑ Production Schedule 2021: 25,000 units 2022: 39,000 units 2023: 26,000 units 2024: 38,000 units Print Done
Vincent Limited paid $100,000 to purchase equipment at the beginning of 2020. Vincent Limited estimated the useful life of the equipment to be 5 years or 200,000 units. The equipment will be considered fully amortized a when the balance in the Accumulated Depreciation account reaches $100,000. The equipment produced 50,000 units in 2020. Required:a. Determine the estimated residual value of the equipment.b. What is the amortizable cost of the equipment?c. Calculate depreciation expense for 2020 under each of the following methods:i. straight-lineii. units-of-productioniii. double-declining-balanced. If you were a new accountant in a company and you were asked to determine how best to depreciate a new machine they just bought; how would you determine the best method? What is the difference between your method and other method? How does your method affect the income statement?
On Jan. 1, 2021, Mother, Inc., whose financial year end is every Dec. 31, purchased a unit of equipment at a total cost of P10,000,000. The equipment is estimated to have a useful life of 5 years with a residual value equal to 10% of its cost. - How much is the depreciation expense for 2021 using the straight line depreciation method? - How much is the depreciation expense for 2024 using the SYD depreciation method? - How much is the depreciation expense for 2025 using the double declining balance depreciation method?
Please help me
Mwakisha, a contractor, started business on 1 January 2018. Purchases and disposals of machines over the subsequent three years were as follows: Machine Date of Cost Date of Purchase Disposal Shs. MA 1 1 January 2018 5,000,000 MB 2 1 July 2019 2,500,000 1 June 2020 MC 3 1 October 2020 7,000,000 The machines are depreciated on straight line basis using a rate of 20 per cent per annum. Required: For the years 2018, 2019 and 2020, calculate the depreciation…
Waterway Company purchased Machine #201 on May 1, 2020. The following information relating to Machine # 201 was gathered at the end of May. Price Credit terms Freight-in Preparation and installation costs Labor costs during regular production operations (a) It is expected that the machine could be used for 10 years, after which the salvage value would be zero. Waterway intends to use the machine for only 8 years, however, after which it expects to be able to sell it for $2,070. The invoice for Machine #201 was paid May 5, 2020. Waterway uses the calendar year as the basis for the preparation of financial statements. (1) (2) Compute the depreciation expense for the years indicated using the following methods. (3) Straight-line method for 2020 $117,300 Sum-of-the-years'-digits method for 2021 2/10, n/30 Double-declining-balance method for 2020 $1,104 $5,244 $14,490 $ LA $ $ Depreciation Expense
On January 1, 2019, Sinaran purchased equipment. Following are the costs incurred in connection with the purchase of this equipment: - Purchase price of IDR 500,000,000 plus 10% VAT (IDR 50,000,000) which can be credited - The company pays an independent professional to modify the equipment to fit the specifications desired by the company. The fee paid for professional services is IDR 40,000,000 and for the spare part costs for the modification purposes IDR 10,000,000. - The cost of testing the equipment so that it functions according to its purpose is Rp.25,000,000. - The proceeds from the sale of goods resulting from the testing process are IDR 5,000,000. Requested: Calculate the cost of the equipment according to PSAK 16
Kingbird Construction Company began work on a $418,500 construction contract in 2020. During 2020, Kingbird incurred costs of $285,500, billed its customer for $233,000, and collected $172,000. At December 31, 2020, the estimated additional costs to complete the project total $155,765.Prepare Kingbird’s journal entry to record profit or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.) No. Account Titles and Explanation Debit Credit (a) enter an account title to record the transaction using the percentage-of-completion method enter a debit amount enter a credit amount enter an account title to record the transaction using the percentage-of-completion method enter a debit…
Blossom Company purchased a large piece of equipment on October 1, 2023. The following information relating to the equipment was gathered at the end of October: Price Credit terms $40,000 2/10, n/30 Engineering costs $3,000 Maintenance costs during regular production operations $6,000 It is expected that the equipment could be used for 12 years, after which the salvage value would be zero. Blossom intends to use the equipment for only 10 years, however, after which it expects to be able to sell it for $2,600. The equipment was delivered on October 1 and the invoice for the equipment was paid on October 9, 2023. Blossom uses the calendar year to prepare financial statements. Blossom follows IFRS for financial statement purposes. (a) Calculate the depreciation expense for the years indicated using the following methods. (Do not round intermediate calculations. Round final answers to 0 decimal places, e.g. 5,275.) 1. Straight-line method for 2023 $ 2. Sum-of-the-years'-digits method for…