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preciation example on page 7-7 of the VLN determine Activity based year 2 accumulated depreciation_______ 2. Followin

preciation example on page 7-7 of the VLN determine Activity based year 2 accumulated depreciation_______ 2. Followin

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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1. Following the depreciation example on page 7-7 of the VLN determine Activity based year 2 accumulated depreciation_______ 2. Following the depreciation example on page 7-7 of the VLN, determine Activity based Year 2 Book value_______ Bold the answers only
Year 1 Depreciation expense Accumulated depreciation Book value Year 2 Depreciation expense Accumulated depreciation Book value Year 3 Depreciation expense Accumulated depreciation Book value Partial Year Depreciation Assume the stamping machine was purchased on October 1*, using straight-line depreciation, depreciation expense for year 1 would be: Change in Estimate Determine book value before the change in estimate Determine the remaining useful life based on the change in estimate Determine the new residual value based on the change in estimate Recalculate depreciation expense using the book value prior to the change in estimate as the “new cost" and use the new residual value and remaining useful life. Depreciation expense after change in estimate = prior to change – Residual value BV Remaining Life in years PART C: ASSET DISPOSITION - Record depreciation for time used in the year of disposal Remove asset from books (Asset and Accumulated Depreciation (XA)) - Record gain/loss from removal of asset, if any. Practice: Landscape Company sells a mower it used in its business. Acquisition (historical) cost was $8,000, 4 year useful life, no residual value; mower is sold after 1.5 years of use. Calculate annual depreciation (straight line): $ Calculate depreciation for the year of sale. S Record depreciation in the year of sale: Depreciation expense (E+àSE-) Accumulated depreciation (XA+)
Transcribed Image Text:Year 1 Depreciation expense Accumulated depreciation Book value Year 2 Depreciation expense Accumulated depreciation Book value Year 3 Depreciation expense Accumulated depreciation Book value Partial Year Depreciation Assume the stamping machine was purchased on October 1*, using straight-line depreciation, depreciation expense for year 1 would be: Change in Estimate Determine book value before the change in estimate Determine the remaining useful life based on the change in estimate Determine the new residual value based on the change in estimate Recalculate depreciation expense using the book value prior to the change in estimate as the “new cost" and use the new residual value and remaining useful life. Depreciation expense after change in estimate = prior to change – Residual value BV Remaining Life in years PART C: ASSET DISPOSITION - Record depreciation for time used in the year of disposal Remove asset from books (Asset and Accumulated Depreciation (XA)) - Record gain/loss from removal of asset, if any. Practice: Landscape Company sells a mower it used in its business. Acquisition (historical) cost was $8,000, 4 year useful life, no residual value; mower is sold after 1.5 years of use. Calculate annual depreciation (straight line): $ Calculate depreciation for the year of sale. S Record depreciation in the year of sale: Depreciation expense (E+àSE-) Accumulated depreciation (XA+)
Calculate annual depreciation (straight line): $ Calculate depreciation for the year of sale. S Record depreciation in the year of sale: Depreciation expense (E+àSE-) Accumulated depreciation (XA+ Mower Accumulated Depreciation 8,000 2,000 Total accumulated depreciation at time of sale: $ Book value of the asset at the time of sale is:$ Record the sale of the mower for $5,000: Cash (A+) Accumulated depreciation (XA- àA+ Mower (A-) Record the sale of mower Record the sale of the mower for $6,000: Cash (A+) Accumulated depreciation (XA- àA+) Mower (A-) Record the sale of mower Record the sale of the mower for $4,000: Cash (A+) Accumulated depreciation (XA- àA+) Mower (A-) Record the sale of mower ANALYSIS Profit Margin (net profit margin): Question: For each dollar of sales, how much profit is the company making? Net income Net sales Profit margin = x 100 = NPM% Practice: Quality Resort Toys had sales of $1,900,000; net sales were $1,880,000 with cost of goods sold of $1,000,000 resulting in net income of $235,000. Determine the Net Profit margin % Chapter 7 Page 7-9
Transcribed Image Text:Calculate annual depreciation (straight line): $ Calculate depreciation for the year of sale. S Record depreciation in the year of sale: Depreciation expense (E+àSE-) Accumulated depreciation (XA+ Mower Accumulated Depreciation 8,000 2,000 Total accumulated depreciation at time of sale: $ Book value of the asset at the time of sale is:$ Record the sale of the mower for $5,000: Cash (A+) Accumulated depreciation (XA- àA+ Mower (A-) Record the sale of mower Record the sale of the mower for $6,000: Cash (A+) Accumulated depreciation (XA- àA+) Mower (A-) Record the sale of mower Record the sale of the mower for $4,000: Cash (A+) Accumulated depreciation (XA- àA+) Mower (A-) Record the sale of mower ANALYSIS Profit Margin (net profit margin): Question: For each dollar of sales, how much profit is the company making? Net income Net sales Profit margin = x 100 = NPM% Practice: Quality Resort Toys had sales of $1,900,000; net sales were $1,880,000 with cost of goods sold of $1,000,000 resulting in net income of $235,000. Determine the Net Profit margin % Chapter 7 Page 7-9
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