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FINANCIAL ACCOUNTING
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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During the first month of its current fiscal year, Green Co. incurred repair costs of $24,000 on a machine that had 4 years of remaining depreciable life. The repair cost was inappropriately capitalized. Green Co. reported operating income of $163,000 for the current year. Required: a. Assuming that Green Co. took a full year's straight-line depreciation expense in the current year, calculate the operating income that should have been reported for the current year. Operating Income b. Assume that Green Co.'s total assets at the end of the prior year and at the end of the current year were $933,000 and $1,021,000, respectively. Calculate ROI (based on operating income) for the current year using the originally
Transcribed Image Text:During the first month of its current fiscal year, Green Co. incurred repair costs of $24,000 on a machine that had 4 years of remaining depreciable life. The repair cost was inappropriately capitalized. Green Co. reported operating income of $163,000 for the current year. Required: a. Assuming that Green Co. took a full year's straight-line depreciation expense in the current year, calculate the operating income that should have been reported for the current year. Operating Income b. Assume that Green Co.'s total assets at the end of the prior year and at the end of the current year were $933,000 and $1,021,000, respectively. Calculate ROI (based on operating income) for the current year using the originally
b. Assume that Green Co.'s total assets at the end of the prior year and at the end of the current year were $933,000 and $1,021,000, respectively. Calculate ROI (based on operating income) for the current year using the originally reported data and then using corrected data. (Round your answers to 1 decimal place. (e.g., 32.1)) ROI Original data % Corrected data % c. Indicate the effect on ROI of subsequent years if the error is not corrected. ROI will be too low. ROI will be too high. O ROI will remains the same.
Transcribed Image Text:b. Assume that Green Co.'s total assets at the end of the prior year and at the end of the current year were $933,000 and $1,021,000, respectively. Calculate ROI (based on operating income) for the current year using the originally reported data and then using corrected data. (Round your answers to 1 decimal place. (e.g., 32.1)) ROI Original data % Corrected data % c. Indicate the effect on ROI of subsequent years if the error is not corrected. ROI will be too low. ROI will be too high. O ROI will remains the same.
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