Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 9, Problem 10Q
After merging with Northwest Airlines, Delta Airlines increased the estimated useful life and increased the estimated residual value of its flight equipment. All else equal, how will each of these changes affect Delta’s
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In Able Company’s efforts to estimate a value for Baker Company's goodwill, Able is estimating Baker Company's expected future earnings. Able is using Baker's past earnings to project the future earnings. Which of the following items should be eliminated from Baker's past earnings in order to project future earnings?
Extraordinary items Amortization expense for identifiable intangibles
a. Yes Nob. Yes Yesc. No Yesd. No No
1. Please explain the concept of depreciation in your own words and discuss why it is important. Wouldn't it make more sense for companies to fully expense fixed assets in the year of purchase rather than depreciating them over time?
2. 1. What is the definition of a fixed asset and which expenditures can be added to the capitalized cost of a fixed asset?
3. 2. Please define the term "Net book value."
Which of the following statements is/are correct?
(i) An increase in the estimated useful life of a non-current (fixed) asset reduces the
annual depreciation charge.
(ii) A reduction in the estimated residual value of a non-current (fixed) asset
decreases the annual depreciation charge.
(iii) If the sales proceeds of a non-current (fixed) asset are greater than its net book
value, this indicates insufficient charge of depreciation in the income statements
(profit and loss accounts) of previous years.
Is it
a) (i) only
b) (ii) only
c) (i), (ii) and (iii)
d) (i) and (ii) only
Chapter 9 Solutions
Fundamentals Of Financial Accounting
Ch. 9 - Define long-lived assets. What are the two common...Ch. 9 - Under the cost principle, what amounts should be...Ch. 9 - What is the term for recording costs as assets...Ch. 9 - 4. Waste Management, Inc., regularly incurs costs...Ch. 9 - Distinguish between ordinary repairs and...Ch. 9 - Describe the relationship between the expense...Ch. 9 - Why are different depreciation methods allowed?Ch. 9 - In computing depreciation, three values must be...Ch. 9 - Prob. 9QCh. 9 - After merging with Northwest Airlines, Delta...
Ch. 9 - A local politician claimed, to reduce the...Ch. 9 - What is an asset impairment? How is it accounted...Ch. 9 - What is book value? When equipment is sold for...Ch. 9 - Prob. 14QCh. 9 - Prob. 15QCh. 9 - FedEx Corporation reports the cost of its aircraft...Ch. 9 - Prob. 17QCh. 9 - Prob. 18QCh. 9 - (Supplement 9A) How does depletion affect the...Ch. 9 - (Supplement 9B) Over what period should an...Ch. 9 - Prob. 1MCCh. 9 - Prob. 2MCCh. 9 - Prob. 3MCCh. 9 - A company wishes to report the highest earnings...Ch. 9 - Barber, Inc., depreciates its building on a...Ch. 9 - Thornton Industries purchased a machine on July 1...Ch. 9 - ACME. Inc., uses straight-line depreciation for...Ch. 9 - What assets should be amortized using the...Ch. 9 - Prob. 9MCCh. 9 - The Simon Company and the Allen Company each...Ch. 9 - Classifying Long-Lived Assets and Related Cost...Ch. 9 - Prob. 2MECh. 9 - Prob. 3MECh. 9 - Computing Book Value (Straight-Line Depreciation)...Ch. 9 - Computing Book Value (Units-of-Production...Ch. 9 - Computing Book Value (Double-Declining-Balance...Ch. 9 - Calculating Partial-Year Depreciation Calculate...Ch. 9 - Recording Asset Impairment Losses After recording...Ch. 9 - Recording the Disposal of a Long-Lived Asset...Ch. 9 - Reporting and Recording the Disposal of a...Ch. 9 - Prob. 11MECh. 9 - Prob. 12MECh. 9 - Computing and Evaluating the Fixed Asset Turnover...Ch. 9 - (Supplement 9A) Recording Depletion for a Natural...Ch. 9 - Prob. 15MECh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Determining Financial Statement Effects of an...Ch. 9 - Prob. 4ECh. 9 - Determining Financial Statement Effects of...Ch. 9 - Computing Depreciation under Alternative Methods...Ch. 9 - Computing Depreciation under Alternative Methods...Ch. 9 - Prob. 8ECh. 9 - Demonstrating the Effect of Book Value on...Ch. 9 - Evaluating the Impact of Estimated Useful Lives of...Ch. 9 - Calculating the Impact of Estimated Useful Lives...Ch. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Computing and Interpreting the Fixed Asset...Ch. 9 - Computing Depreciation and Book Value for Two...Ch. 9 - Prob. 16ECh. 9 - Prob. 17ECh. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Prob. 2CPCh. 9 - Analyzing and Recording Long-Lived Asset...Ch. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Recording and Interpreting the Disposal of...Ch. 9 - Prob. 3PACh. 9 - Prob. 4PACh. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Recording and Interpreting the Disposal of...Ch. 9 - Analyzing and Recording Long-Lived Asset...Ch. 9 - Prob. 4PBCh. 9 - Accounting for Operating Activities (Including...Ch. 9 - Prob. 1SDCCh. 9 - Prob. 2SDCCh. 9 - Ethical Decision Making: A Mini-Case Assume you...Ch. 9 - Critical Thinking: Analyzing the Effects of...Ch. 9 - Prob. 7SDCCh. 9 - Accounting for the Use and Disposal of Long-Lived...
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- 1. A company is deciding whether to exchange an old asset for a new asset. Within the context of the exchange decision, and ignoring income tax considerations, the undepreciated book value of the old asset would be considered a(an) Sunk cost Irelevant cost No No Yes No No Yes d. Yes Yes 2. Expected future costs that will differ among alternatives a. Opportunity cost. b. Relevant costs. c. Sunk cost. d. Out-of-pocket costs.arrow_forwardAll equipment costs will continue to be depreciated on a straight-line basis. For simplicity, ignore income taxes and the time value of money. Q.Assume that the capital expenditures to replace and upgrade the production equipment are as given in the original exercise, but that the production and sales quantity is not known. For what production and sales quantity would TechGuide (i) upgrade the equipment or (ii) replace the equipment?arrow_forwardWhich of these statements about depreciation is true? a. MACRS depreciation incorporates only declining balance depreciation in itscomputations for all assets.b. Straight line depreciation is actually not straight at all, but is based on anexponential decay function.c. For twenty-first century assets in the U.S., MACRS depreciation and taxdepreciation have the same meaning.d. Gains tax is paid on any revenue that exceeds the year's depreciation allowance.arrow_forward
- Indicate whether each of the following statements is true or false. Depreciation, depletion, and amortization all involve the allocation of the cost of property, plant and equipment (PPE) to expense. Answer An accelerated depreciation method is appropriate when the asset’s economic usefulness is the same each year Answer The declining-balance method does not deduct the residual value in computing the depreciation base. Answerarrow_forwardWhat is the double declining balance depreciation calculation? O Long-term assets that lack physical substance, and whose existence is often based on a legal contract. O An accelerated method that allocates a higher amount of depreciation expense in the earlier years of the asset's life and lower depreciation in later years O Allocating an equal amount of depreciation expense to each year of the assets service life. O The amount the company expects to receive from selling the assets at the end of its service life. ASUS f4 f5 E3 f6 f7 f8 f9 f10 f11 & 4 7 9. Y U 61 18 t6 5 LLarrow_forwardA non-current asset was acquired for $200,000 on 200-day terms. Which of the following statements regarding the $200,000 is correct? Group of answer choices It is an expenditure, but not a cost nor an expense. It is not a cost, nor an expenditure, nor an expense. It is a cost, but not an expenditure nor an expense. It is a cost and an expenditure, but not an expense. It is a cost and an expense, but not an expenditure.arrow_forward
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- If a company wanted to take advantage of depreciation expenses, how would this company accomplish this? What would be the advantages? Are there any disadvantages?arrow_forwardWith regards to depreciation, which of the following is not true? O Straight Line depreciation includes initial cost and salvage value in the depreciation calculation. In straight line depreciation, the depreciation life (n) is set based on the MACRS property class. MACRS Depreciation method is the only method allowed for accounting and tax purposes. In MACRS depreciation, the salvage value is assumed to be zero. In straight line depreciation, the asset is depreciated down to a book value equal to the salvage value.arrow_forward1.1 Zenith Company has a large portion of its plant assets concentrated in an area where technology is changing rapidly. Zenith wants to minimize taxable income and maximize net income reported to sshareholders. Recommend a course of action for Zenith., Support your recommendation. 1.2 Why do many companies use one method to calculate depreciation for the income statement prepared for external reporting and and another method for income tax purposes?arrow_forward
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