Financial Statement Analysis K R Subramanyam John J Wild McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies‚ Inc. All rights reserved. 4-2 Analyzing Investing Activities 4 CHAPTER 4-3 Current Asset Introduction Classification Current (Short-term) Assets Resources or claims to resources that are expected to be sold‚ collected‚ or used within one year or the operating cycle‚ whichever is longer. Noncurrent (Longterm) Assets Resources or claims to resources
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a. Delta Airlines Depreciation Method Depreciation Method Salvage Value For every $100 mil Depreciated Annual Depreciation Prior to 1986 Straight-line‚ 10 years 10% 100-(.1*100)=90 90/10=9 $9 mil 1968 – 1993 Straight-line‚ 15 years 10% 100-(.1*100)=90 90/15=6 $6 mil After 1993 Straight-line‚ 20 years 5% 100-(.05*100)=95 95/20=4.75 $4.75 mil b. Singapore Airlines Depreciation Method Depreciation Method Salvage Value For every $100 mil Depreciated Annual Depreciation Prior to 1989 Straight-line
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Chapter 7 Fundamentals of Capital Budgeting 7-1. Pisa Pizza‚ a seller of frozen pizza‚ is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $20 million per year. While many of these sales will be to new customers‚ Pisa Pizza estimates that 40% will come from customers who switch to the new‚ healthier pizza instead of buying the original version. a. b. Assume customers will spend
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tangible business asset. In 2013 and 2014‚ it deducted $3‚140 and $7‚200 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 35 percent. Compute Firm A’s adjusted basis in the asset at the end of each year. (part b) a) 2013: $39‚660; 2014: $29‚320 b) 2013: $46‚860; 2014: $39‚660 Initial cost basis$50‚000 Year 1 depreciation (3‚140) Adjusted basis at end of 2013$46‚860 Year 2 depreciation (7‚200) Adjusted basis at end of 2014$39‚660 c) 2013: $50‚000; 2014:
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Instructions for the Microsoft Excel Templates by Rex A Schildhouse | | Be advised‚ the template workbooks and worksheets are not protected. Overtyping any data may remove it. | | | Extensive detail and information is contained within the help function of Microsoft Excel and in the provided text. | | You should enter your name‚ date‚ instructor’s name‚ and course into the cells at the top of the page. This information will be printed on the top of each page if the template requires
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Part B a. What is depreciation? What is the difference between straight line and reducing balance method of depreciation? How can Murah Travel determine which depreciation method to use? (Explain in detail) Depreciation is an expense‚ it is the process of what benefit that the business can get from the non-current assets they own from its original cost that is spread throughout the business over the years. Depreciation occurs due to wear and tear from continuous use‚ physical weather or the non-current
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$130‚000 is expected to generate annual cash inflow of $32‚000 for 6 years. Depreciation is allowed on the straight line basis. It is estimated that the project will generate scrap value of $10‚500 at end of the 6th year. Calculate its accounting rate of return assuming that there are no other expenses on the project. Solution Annual Depreciation = (Initial Investment − Scrap Value) ÷ Useful Life in Years Annual Depreciation = ($130‚000 − $10‚500) ÷ 6 ≈ $19‚917 Average Accounting Income = $32‚000
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What should you know about Financial Accounting? 1. How to measure assets? How to present assets? *Assets are economic resources owned or controlled by the company and can be measured by dollars. *Measure assets by the Principle of Historical Cost. *The cost of asset includes all expenditures that make that asset in place and ready for use. * Present assets in the Balance Sheet by the rank of liquidity. 2. How to measure profits? How to present profits? * Operating
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QUESTION 1 Which of these is not an advantage of the straight line method of depreciation? A It is easy to work out due to a simple formula B Calculated once for all the years C Depreciation added to maintenance costs rise as the asset ages D The cost of the asset is spread evenly through its useful life. Which of the following is not correct regarding depreciation? A It is due to the use of an asset B Is not incurred if the asset is not used C It is a portion of a long term expense D
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Inventory Accounts Payable Accounts Receivable Sales COGS Inventory Cash Accounts Receivable Accounts Payable Cash Misc. Expenses Cash Salaries Expense Cash Depreciation Expense Accumulated Depreciation Long-‐term loan Cash $ 8 250 11 000 7 700 19 000 11 000 1 500 2 600 200 800
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