The document contains 9 questions regarding non-current assets, including property, plant, and equipment (PP&E) and intangible assets. It asks the reader to predict the impact of changes to depreciation and capital expenditures on a company's balance sheet and income statement. It also provides depreciation schedules using different methods and asks questions about amortizing intangible assets over their useful lives.
The document contains 9 questions regarding non-current assets, including property, plant, and equipment (PP&E) and intangible assets. It asks the reader to predict the impact of changes to depreciation and capital expenditures on a company's balance sheet and income statement. It also provides depreciation schedules using different methods and asks questions about amortizing intangible assets over their useful lives.
The document contains 9 questions regarding non-current assets, including property, plant, and equipment (PP&E) and intangible assets. It asks the reader to predict the impact of changes to depreciation and capital expenditures on a company's balance sheet and income statement. It also provides depreciation schedules using different methods and asks questions about amortizing intangible assets over their useful lives.
The document contains 9 questions regarding non-current assets, including property, plant, and equipment (PP&E) and intangible assets. It asks the reader to predict the impact of changes to depreciation and capital expenditures on a company's balance sheet and income statement. It also provides depreciation schedules using different methods and asks questions about amortizing intangible assets over their useful lives.
Your boss has asked you to make some changes to a forecast model and to sanity check the output once the changes are processed. She suggests you check the following line items:
Rio Fashions & Co
Gross PP&E 5,005 Accumulated depreciation 4,123 Net PP&E 882 Cost of goods sold 800 Total assets 3,258 Total liabilities 1,147 Total equity 2,111
Predict what these numbers will be when you increase the warehouse depreciation expense by 156:
Rio Fashions & Co – adjusted for extra depreciation
Gross PP&E Accumulated depreciation Net PP&E Cost of goods sold Total assets Total liabilities Total equity
Predict what these numbers will be when you increase the capital expenditure by 320 (paid in cash). Assume the first change has not yet been made
Rio Fashions & Co – adjusted for extra capital expenditure
Gross PP&E Accumulated depreciation Net PP&E Cost of goods sold Total assets Total liabilities Total equity
Question 2
Harley Davidson had the following property, plant and equipment figures in their financial statements:
Property, plant & equipment, at cost:
Land & land improvements 2,139 Buildings & improvements 84,150 Machinery & equipment 381,722
1 Gross property, plant & equipment 468,011 Less accumulated depreciation 183,236 Net property, plant & equipment 284,775
Using the following assumptions and BASE analysis, forecast the impact on Harley Davidson’s PP&E accounts: • Depreciation will remain as 15% of last year’s net PP&E • Capital expenditure will remain as 8% of the same year sales
Projected Year 1 Projected Year 2
Sales 1,485,000 1,634,000 Net PP&E B A S E
Gross PP&E
Accumulated depreciation
Income statement depreciation expense
Question 3
The José Brothers purchased a large car manufacturing plant in New Jersey. They estimated the factory had five more years of operating life left. They asked their new analyst to prepare a depreciation schedule for the factory using three different methods; straight line, sum-of-the-years’-digits (SYD), and double declining balance (DDB). They estimated the factory would have a zero salvage value. Below are the schedules she prepared:
Excluding the impact of taxes, which depreciation method will save the most cash?
Which method will produce the highest charge to net income in year 1?
Which method will produce the highest charge to net income in year 4?
Which method is the most efficient from a taxation point of view?
Which method gives the highest net book value at the end of year 3?
2 Question 4
You purchase an ice cream making machine for your new ice cream making business. The machine costs 7,500. You expect the machine to last you three years and depreciate fairly evenly each year. At the end of three years you approximate the salvage value of the machine to be 500. Complete the table:
Year 1 Year 2 Year 3
Depreciation Gross value Acc depreciation Net value
Question 5
What makes intangible assets different from other PP&E?
Question 6
How do we reduce intangible assets over time?
Question 7
Which of the following are not intangible assets?
A building A patent a company has purchased Rights to a broadcasting license Inventories ready to be sold Orders from customers that have not been shipped
Question 8
Is amortization a cash expense?
Question 9
You purchase a patent for a special ice cream making recipe. The patent costs you 2,500 and lasts fifteen years. Fill out the following table:
