a machine dealer for $25‚000. Lassen bought the machine for $55‚000 and has claimed $15‚000 of depreciation expense on the machine. What gain or loss does Lassen realize on the transaction? ($15‚000) loss‚ computed as follows: Description | Amount | Explanation | (1) Amount Realized | $25‚000 | Given | (2) Adjusted Basis | 40‚000 | $55‚000 original basis - $15‚000 accumulated depreciation | Gain (Loss) Realized | ($15‚000) | (1) – (2) | 37. [LO 3‚ 4] In year 0‚ Longworth Partnership
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shelving in order to renovate the store. If they sell‚ they expect to receive $14‚000 for the shelving. Which of these is TRUE about the shelving? a. The accumulated depreciation at the point of sale will be $41‚000. b. The gain on sale of shelving will be $1‚000. c. The entry to record the sale will debit the accumulated depreciation account by $55‚000. d. The asset received is a $1‚000 more than the asset removed. Disposal: Compare book value ($15‚000) to proceeds ($14‚000) to see you have a
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CHAPTER 11 Internal Service Funds ANSWERS TO QUESTIONS Question 11-1 Among the advantages to the unit establishing such an Internal Service Fund are the following: 1. Centralized purchasing. Centralized purchasing might permit a more qualified purchasing agent to be employed; lead to the acquisition of better goods for the same price or goods of equal quality to those now being acquired at a lower price; result in better control of quantities ordered; increase both the quantity discounts received
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YOU DON’T The case of Jet Airways and its Accounting Policies Presentation Outline 1. Jet Airways - Company Background 2. Airline Industry Background 3. Main Issues a. Highlights of First Quarter 2008 Results b. 1st New Policy: Adoption of New Depreciation Method c. 2nd New Policy: Foreign Currency Exchange Differences d. 3rd New Policy: Revaluation of Fixed Assets 4. Summary 2 Company Background India’s largest private domestic and international airline Promoted by Naresh Goyal‚ its founder
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and water 60% variable 60‚000 Managerial salaries 20% variable 100‚000 Maintenance costs 40% variable 100‚000 Depreciation 0% variable 120‚000 Indirect labor 50% variable 120‚000 Non manufacturing costs Accounts Nature or Classification Amount in Tshs 000 Administration expenses 0% variable 120‚000 Marketing expenses 40% variale 100‚000 Depreciation costs 0% variable 80‚000 During the year 2013‚ Ujamaa Ltd produced 80‚000 bags. Management is forecasting sales price
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equipment is USD 12‚000‚ the cost for transportation and installation is USD 1‚000 USD. The asset is depreciated according to a straight line depreciation scheme within 5 years. It is expected that the project can produce and sell 7‚500 units of product at the price of USD 2 per unit‚ for the first year. The operating costs for the first year (excluding depreciation) are estimated to be USD 10‚000. Revenues and operating costs are supposed to grow at the annual rate of 7% and 5% respectively. The pre-tax
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CHAPTER 6 Objectives Identify different types of long-term operational assets. Determine the cost of long-term operational assets. Explain how different depreciation methods affect financial statements. Determine how gains and losses on disposals of long-term operational assets affect financial statements. Explain how expense recognition for natural resources (depletion) affects financial statements. Explain how expense recognition for intangible assets (amortization) affects
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Cash Flow Statement When fixed assets are sold‚ by definition‚ money is‚ or will be received. The result is entries to Cash or Accounts Receivable. You must also make entries to remove the Asset from the books and to remove any Accumulated Depreciation on the books for that Asset. The result is that the sum of the debits will not equal the credits in this transaction. The account that will be used to balance the debits and credits is called Gain on Disposition of Fixed Assets. The following
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machine for a new one. 13.6 Year 0 Net Cash Flow = Machine Price + Cost of Install + Increase in Net Working Capital Year 0 = $1‚080‚000 + $22‚500 + $15‚500 = ($1‚118‚000) Depreciation Year 1 = ($1‚080‚000 + $22‚500) x 0.3333 = $367‚463 Depreciation Year 2 = ($1‚080‚000 + $22‚500) x 0.4445 = $409‚061 Depreciation Year 3 = ($1‚080‚000 + $22‚500) x 0.1481 = $163‚ 280 Net Operating Cash Flow for Year 1 = $375‚612 ; Year 2 = $418‚521 ; Year 3 = $304‚148 Book Value of the Asset = ($1‚080‚000
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Intermediate Accounting Accounting Cycle Project You have been engaged to perform accounting services for Herman and Sons’ Law Offices. Your responsibilities include maintaining all accounting records and preparing annual financial statements. Herman and Sons’ opened on January 1‚ 2015. During the year‚ the firm had the following transactions: 1. January 2: The owners invested $200‚000 into the business and acquired 25‚000 shares of capital stock in return. 2. January 15: Herman and Sons’ took
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