Explain whether it is permissible to record additional depreciation on the assets if they are still useful in the business.

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Answer 1

Question

Chapter 10, Problem 9DQ

(a)

To determine

Explain whether it is permissible to record additional depreciation on the assets if they are still useful in the business.

(b)

To determine

Explain accounting treatment for removing the cost and the accumulated depreciation from the accounts.

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's expenses, Gross margin, and Net income?

Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

Answer 2

Question

Chapter 10, Problem 9DQ

(a)

To determine

Explain whether it is permissible to record additional depreciation on the assets if they are still useful in the business.

(b)

To determine

Explain accounting treatment for removing the cost and the accumulated depreciation from the accounts.

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Answer 3

Question

Chapter 10, Problem 9DQ

(a)

To determine

Explain whether it is permissible to record additional depreciation on the assets if they are still useful in the business.

(b)

To determine

Explain accounting treatment for removing the cost and the accumulated depreciation from the accounts.

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Answer 4

Question

Chapter 10, Problem 9DQ

(a)

To determine

Explain whether it is permissible to record additional depreciation on the assets if they are still useful in the business.

(b)

To determine

Explain accounting treatment for removing the cost and the accumulated depreciation from the accounts.

Expert Solution & Answer

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Answer 5

Chapter 10, Problem 9DQ

(a)

To determine

Explain whether it is permissible to record additional depreciation on the assets if they are still useful in the business.

(b)

To determine

Explain accounting treatment for removing the cost and the accumulated depreciation from the accounts.

Answer 6

Chapter 10, Problem 9DQ

(a)

To determine

Explain whether it is permissible to record additional depreciation on the assets if they are still useful in the business.

Answer 7

Chapter 10, Problem 9DQ

(a)

To determine

Explain whether it is permissible to record additional depreciation on the assets if they are still useful in the business.

Answer 8

(b)

To determine

Explain accounting treatment for removing the cost and the accumulated depreciation from the accounts.

Answer 9

(b)

To determine

Explain accounting treatment for removing the cost and the accumulated depreciation from the accounts.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 10 - ONeil Office Supplies has a fleet of automobiles...Ch. 10 - Prob. 2DQ Ch. 10 - Prob. 3DQ Ch. 10 - Keyser Company purchased a machine that has a...Ch. 10 - Is it necessary for a business to use the same...Ch. 10 - a. Under what conditions is the use of the...Ch. 10 - Prob. 7DQ Ch. 10 - Immediately after a used truck is acquired, a new...Ch. 10 - Prob. 9DQ Ch. 10 - Prob. 10DQ

Explain whether it is permissible to record additional depreciation on the assets if they are still useful in the business.

Solution Summary: The author explains that it is not permissible to record additional depreciation on the assets if they are still useful in the business.

Explain whether it is permissible to record additional depreciation on the assets if they are still useful in the business.

Explain accounting treatment for removing the cost and the accumulated depreciation from the accounts.

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