On january 1, 2016, knapp corporation acquired machinery at a cost of $1,250,000. knapp adopted the double-declining balance met
hod of depreciation for this machinery and had been recording depreciation over an estimated useful life of ten years, with no residual value. at the beginning of 2019, a decision was made to change to the straight-line method of depreciation for the machinery. the depreciation expense for 2019 would be
Cost on January 1 2016 = $1,250,000 Life = 10 years
Therefore, Double-declining depreciation rate = 2*(1,250,000/10)/1,250,000 = 2*0.1 = 2*10% = 20% Book value at end of 2016 = 1,250,000 - (1,250,000*20/100) = $1,000,000 Book value at end of 2017 = 1,000,000 - (1,000,000*20/100) = $800,000 Book value at end of 2018 = 800,000 - (800,000*20/100) = $640,000
Changing to straight line depreciation: Life remaining = 7 years Book value = $640,000
Depreciation expense per year = 640,000/7 = $91,428.57
Therefore, depreciation expense for 2019 = $91,428.57
Centralized organization can be defined as a hierarchy decision-making structure where all decisions and processes are handled strictly at the top or the executive level.
The approach here is that we calculate the value of the firm after the cash dividend distribution ,which is simply the value of operations of $1000 since the short-term investments of $100 has been used in paying dividends.
Thereafter,the value of equity is the value of operations of $1000 minus the value of debt at $300,that is $700 ($1000-$300).
Finally intrinsic share price=value of equity/number of shares
Remember, in economics the term equilibrium implies that this terms
price and,
quantity demanded
<u>are all equal or in a state of stability.</u>
Therefore, the stock in such an equilibrium market would yield it expected returns since there are no external factors such as increase in price that could affect the value.
