Why is using a budget beneficial?

The Peridot Company purchased machinery on January 2, 2016, for $800,000. A five-year life was estimated and no residual value w

horsena [70]

Answer:

Change in accounting estimate

Depreciation for 2018: $80,000

Explanation:

A change in accounting estimate occurs when there is new information that surfaces, affecting the initial situation. It can affect the carrying amount of an asset or liability as well as alter the accounting for existing and future assets or liabilities.

The machine has a cost of $800,000. It is depreciated using the straight-line method of depreciation. Hence, the depreciation expense is the same annually throughout the life of the asset.

Annual depreciation = (Cost of asset - salvage value) / number of useful years

Old annual depreciation = ($800,000-0) / 5 = $160,000 per year.

By January 2018, the asset has depreciated for two years. Hence the book value of the asset as at 2018 is the difference between the cost of the asset and the total depreciation expense i.e. $800,000 - (160,000 x 2)

= $480,000.

According to the new depreciation estimate, the asset has a useful life of 8 years. Hence the remaining years is 6 years ( 8 - 2).

The annual depreciation currently is = ($480,000 - 0) / 6 = $80,000

Depreciation expense for 2018 = $80,000

5 0

3 years ago

Last year Lowell Inc. had a total assets turnover of 1.40 and an equity multiplier of 1.75. Its sales were $295,000 and its net

katrin [286]

Answer:

ROE would have changed by 8.52%

Explanation:

First we calculate the current ROE using Dupont Equation which gives ROE as,

ROE = Net Income/Sales * Sales/Total Assets * Total Assets/Equity

or

ROE = Net Profit Margin * Total Assets Turnover * Equity Multiplier

Current ROE = 10600/295000 * 1.4 * 1.75 = 0.0880 or 8.8%

The condition says that the net income could have increased to 20850 but other factors will remain constant. Thus, to calculate new ROE, we will calculate the new Net Profit margin but the total assets turnover and the equity multiplier will remain constant as sales assets and capital structure is not changing.

New ROE = 20850/295000 * 1.4 * 1.75 = 0.17316 or 17.32%
The ROE would have changed by 17.32 - 8.80 = 8.52%

7 0

3 years ago

Jane is a roofing contractor. Jane's friend needed a new roof but did not have the cash to pay. Jane's friend instead paid with

monitta

According to the references used I believe the answer would most likely be ...

6 0

2 years ago

On january 1, 2016, knapp corporation acquired machinery at a cost of $1,250,000. knapp adopted the double-declining balance met

Annette [7]

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

5 0

2 years ago

Many employers are wary of giving references for which of the following reasons? They suck up resources and energy from manageme

KIM [24]

Answer:

The most accurate answer is *They fear that if they give a positive reference for someone who doesn't work out in a new job, they may be sued by that person's new employer.

Explanation:

Giving a reference of an employees character, professional and ethical behavior, productivity and integrity is a great responsibility and not just a mere simple act.

this is mainly because the references are a main way to assess the suitability of hiring an employee and if we give an incorrect reference, the other firm might rely on it and hire an ineffective employee.

6 0

2 years ago