Explain whether it is necessary for a business to use the same method of computing depreciation for all classes of depreciable assets.

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Answer 1

Question

Chapter 9, Problem 7DQ

(A)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for all classes of depreciable assets.

(B)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for financial statement purposes and in determining income taxes.

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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 9, Problem 7DQ

(A)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for all classes of depreciable assets.

(B)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for financial statement purposes and in determining income taxes.

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Answer 3

Question

Chapter 9, Problem 7DQ

(A)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for all classes of depreciable assets.

(B)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for financial statement purposes and in determining income taxes.

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Answer 4

Question

Chapter 9, Problem 7DQ

(A)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for all classes of depreciable assets.

(B)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for financial statement purposes and in determining income taxes.

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Answer 5

Chapter 9, Problem 7DQ

(A)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for all classes of depreciable assets.

(B)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for financial statement purposes and in determining income taxes.

Answer 6

Chapter 9, Problem 7DQ

(A)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for all classes of depreciable assets.

Answer 7

Chapter 9, Problem 7DQ

(A)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for all classes of depreciable assets.

Answer 8

(B)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for financial statement purposes and in determining income taxes.

Answer 9

(B)

To determine

Explain whether it is necessary for a business to use the same method of computing depreciation for financial statement purposes and in determining income taxes.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 9 - ONeil Office Supplies has a fleet of automobiles...Ch. 9 - Prob. 2DQ Ch. 9 - Prob. 3DQ Ch. 9 - Prob. 4DQ Ch. 9 - Prob. 5DQ Ch. 9 - Keyser Company purchased a machine that has a...Ch. 9 - Prob. 7DQ Ch. 9 - A. Under what conditions is the use of an...Ch. 9 - Prob. 9DQ Ch. 9 - Prob. 10DQ

Explain whether it is necessary for a business to use the same method of computing depreciation for all classes of depreciable assets.

Solution Summary: The author explains that it is not necessary for a business to use the same method of computing depreciation for financial statement purposes and in determining income taxes.

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Explain whether it is necessary for a business to use the same method of computing depreciation for all classes of depreciable assets.

Explain whether it is necessary for a business to use the same method of computing depreciation for financial statement purposes and in determining income taxes.

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