Question

In: Accounting

Imagine you are the accounting manager for a manufacturing company's fixed assets department. The CFO is...

Imagine you are the accounting manager for a manufacturing company's fixed assets department. The CFO is assessing the benefits of acquiring a new John Deere Tractor and Elite Combine and disposing of similar used equipment. The CFO has asked you to do the following: Explain the effect of each transaction on the financial statements. Explain how the substance and asset and/or monetary exchange affects the reporting of the transaction and the financial statements. Be sure to elaborate on your thinking and provide examples.

Solutions

Expert Solution

Acquiring a new John Deere tractor has two options paid it upfront or makes installment payments. If thetractor is paid upfront then there won’t be an overall impact on the balance sheet because it will increasethe amount for equipment and decrease the cash to balance. Now if the client decides to make installmentpayment then it will increase equipment assets and increase liability accounts.

Option:1 When tractor purchased full in cash:

We assume that the cost of new tractor is $15,000, so if we purchased it fully in cash payment, then:

BALANCE SHEET

ASSETS
Fixed Assets will increase by $15,000
Cash/Bank will decrease by $15,000

Option:2 When tractor purchased in installment:

We assume that the cost of new tractor is $15,000 and we pay only $5,000 in cash and rest will pay in 2 equal installment, then:

BALANCE SHEET

Liabilities Assets
Loan will increase by $10,000 Fixed Assets will increase by $15,000
Cash/Bank will decrease by $5,000

Related Solutions

Imagine you are the senior accountant in the fixed assets department of your organization. Management is...
Imagine you are the senior accountant in the fixed assets department of your organization. Management is assessing the benefits of self-constructing fixed assets versus purchasing fixed assets from external sources. Differences of opinion exist among the senior management team on the impact of self-constructing fixed assets versus purchasing fixed assets on the balance sheet, income statement, statement of cash flows, and employee morale. You are asked to provide a presentation to the senior management team highlighting the accounting advantages and...
"Plant Assets" Please respond to the following: Imagine that you are the Chief Financial Officer (CFO)...
"Plant Assets" Please respond to the following: Imagine that you are the Chief Financial Officer (CFO) of a startup airline company. The executive management team has tasked you with making a recommendation about whether the company should buy or lease airplanes. Analyze the major pros and cons for leasing and buying assets. Based on your analysis, provide a recommendation to the executive team. Compare and contrast the three (3) methods for depreciating plant assets. Recommend the method that maximizes profits...
Let's imagine that you are the project manager in the IT department of a large company....
Let's imagine that you are the project manager in the IT department of a large company. The project team is creating a maintenance plan. The team consists of three technicians, a network architect, a training specialist, and you, the project manager. The project is currently in the project-execution phase, and it is time to have your first project status-update meeting. Here are some tips for conducting a successful project status-update meeting: • Determine the meeting place and time. • Invite...
Earleton Manufacturing Company has $3 billion in sales and $606,000,000 in fixed assets. Currently, the company's...
Earleton Manufacturing Company has $3 billion in sales and $606,000,000 in fixed assets. Currently, the company's fixed assets are operating at 85% of capacity. What level of sales could Earleton have obtained if it had been operating at full capacity? Write out your answers completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest dollar. $     What is Earleton's target fixed assets/sales ratio? Do not round intermediate calculations. Round your answer to two decimal...
Earleton Manufacturing Company has $2 billion in sales and $800,000,000 in fixed assets. Currently, the company's...
Earleton Manufacturing Company has $2 billion in sales and $800,000,000 in fixed assets. Currently, the company's fixed assets are operating at 80% of capacity. a. What level of sales could Earleton have obtained if it had been operating at full capacity? Write out your answer completely. Round your answer to the nearest whole number. b. What is Earleton's target fixed assets/sales ratio? Round your answer to two decimal places. c. If Earleton's sales increase 35%, how large of an increase...
Earleton Manufacturing Company has $2 billion in sales and $421,000,000 in fixed assets. Currently, the company's...
Earleton Manufacturing Company has $2 billion in sales and $421,000,000 in fixed assets. Currently, the company's fixed assets are operating at 75% of capacity. What level of sales could Earleton have obtained if it had been operating at full capacity? Write out your answers completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest dollar. $     What is Earleton's target fixed assets/sales ratio? Do not round intermediate calculations. Round your answer to two decimal...
Earleton Manufacturing Company has $2 billion in sales and $900,000,000 in fixed assets. Currently, the company's...
Earleton Manufacturing Company has $2 billion in sales and $900,000,000 in fixed assets. Currently, the company's fixed assets are operating at 80% of capacity. What level of sales could Earleton have obtained if it had been operating at full capacity? Write out your answer completely. Round your answer to the nearest whole number. $   What is Earleton's target fixed assets/sales ratio? Do not round intermediate calculations. Round your answer to two decimal places. % If Earleton's sales increase 40%, how...
Imagine you are the manager of the care coordination department in a large clinic. How will...
Imagine you are the manager of the care coordination department in a large clinic. How will you use IT to provide excellent care coordination for your patients with a chronic disease? Consider how you will identify the chronic disease patients, how the EMR will supply the needed information for your staff of nurse care coordinators, and the role that medication adherence plays.
Imagine you are in HR department and HR manager has advised you to design a basic...
Imagine you are in HR department and HR manager has advised you to design a basic framework which will eventually lead to the development of recruitment, selection and induction policies. The framework can be in the form of flowchart or diagram with relevant explanations. Design the framework and attach with your assessment answers.
You are the new accounting manager at the Barry Transport Company. Your CFO has asked you...
You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company's income tax position based on the following: 1)Pretax accounting income was $62 million and taxable income was $10 million for the year ended December 31, 2018. 2)The difference was due to three items: A)Tax depreciation exceeds book depreciation by $50 million in 2018 for the business complex acquired that year. This amount is scheduled to be $80 million...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT