NEXT Brief Exercise 9-6 On January 1, 2017, the Carla Vista Co. ledger shows Equ
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Question
NEXT Brief Exercise 9-6 On January 1, 2017, the Carla Vista Co. ledger shows Equipment $48,500 and Accumulated Depreciation $18,320. The depreciation resulted from using the straight-line method with a useful life of 10 years and a salvage value of $2,700. On this date, the company concludes that the equipment has a remaining useful life of only 2 years with the same salvage value. Compute the revised annual depreciation The revised annual depreciation LINK TO TEXT INTERACTIVE TUTORIAL Question Attempts: 0 of 2 used SAVE FOR LATER n 4.24.2.4 Ali Rights ( F10Explanation / Answer
Answer to Exercise 9-6:
Depreciation Expense per year = (Cost – Salvage Value) / Useful Life
Depreciation per year before change of Useful Life = (48,500 – 2,700) / 10
Deprecation per year before change of Useful Life = $4,580
No. of Year for which Depreciation has been charged = Accumulated Depreciation / Depreciation per year
No. of Year for which Depreciation has been charged = 18,320 / 4,580
No. of Year for which Depreciation has been charged = 4 years
Book Value at the Beginning of 5th Year = Cost – Accumulated Depreciation
Book Value at the Beginning of 5th Year = $48,500 - $18,320
Book Value at the Beginning of 5th Year = $30,180
Revised Depreciation = (Book Value on the date of Change – Salvage Value) / Revised life
Revised Depreciation = (30,180 – 2,700) / 2
Revised Depreciation = $13,740
Answer to Question No. 9-10.
Return on Assets = Net Income / Average Total Assets
Average Total Assets = (28.55 Billion + 30.90 Billion) / 2
Average Total Assets = $29.77 Billion
Return on Assets = 4.25 / 29.77
Return on Assets = 14.28%
Asset Turnover Ratio = Sales / Total Assets
Asset Turnover Ratio = 21.75 / 30.90
Asset Turnover Ratio = 0.70 times
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