Question

1.

Aneko Company reports the following ($000s): net sales of $13,000 for 2018 and $12,350 for 2017; end-of-year total assets of $16,200 for 2018 and $13,800 for 2017.

Compute its total asset turnover for 2018. (Enter your answers in thousands.)

2.

Assume a company’s equipment carries a book value of $48,000 ($49,500 cost less $1,500 accumulated depreciation) and a fair value of $44,250, and that the $3,750 decline in fair value in comparison to the book value meets the impairment test.

Prepare the entry to record this $3,750 impairment.

3.

A fleet of refrigerated delivery trucks is acquired on January 5, 2018, at a cost of $1,010,000 with an estimated useful life of 8 years and an estimated salvage value of $90,900.

Compute the depreciation expense for the first three years using the double-declining-balance method. (Round your answers to the nearest whole dollar.)

4.

Required information

[The following information applies to the questions displayed below.]

On January 2, 2018, the Matthews Band acquires sound equipment for concert performances at a cost of $68,400. The band estimates it will use this equipment for four years, during which time it anticipates performing about 200 concerts. It estimates that after four years it can sell the equipment for $1,000. During year 2018, the band performs 45 concerts.

Matthews Band uses straight-line depreciation but realizes at the start of the second year that due to concert bookings beyond expectations, this equipment will last only a total of three years. The salvage value remains unchanged.

Compute the revised depreciation for both the second and third years.

5.

Required information

[The following information applies to the questions displayed below.]

On January 2, 2018, the Matthews Band acquires sound equipment for concert performances at a cost of $68,400. The band estimates it will use this equipment for four years, during which time it anticipates performing about 200 concerts. It estimates that after four years it can sell the equipment for $1,000. During year 2018, the band performs 45 concerts.

Compute the year 2018 depreciation using the units-of-production method.

6.

Required information

[The following information applies to the questions displayed below.]

On January 2, 2018, the Matthews Band acquires sound equipment for concert performances at a cost of $68,400. The band estimates it will use this equipment for four years, during which time it anticipates performing about 200 concerts. It estimates that after four years it can sell the equipment for $1,000. During year 2018, the band performs 45 concerts.

Compute the year 2018 depreciation using the straight-line method.

Answer 1

1.

Calculation of total asset turnover ratio (Amount in 000's)

Net Sales of 2018 = $13,000

Total Assets - 2017 = $13,800

Total Assets - 2018 = $16,200

Average assets = ($13,800+$16,200)/2 = $15,000

Asset Turnover ratio = Sales/Average total assets

= $13,000/$15,000

= 0.867 or 86.7%

2.

Equipment Book value = $48,000

Fair Value = $44,250

Impairment loss = $3,750

Journal Entry

Impairment loss $3,750

Equipment $3,750

3.

Cost	$                                           10,10,000
Salvage Value	$                                                 90,900
Estimated useful life	8
Year	Depreciation using double declining balance method
1	$                                             2,52,500
2	$                                             1,89,375
3	$                                             1,42,031

4.

Calculation of depreciation using straight line method

Cost = $68,400

Salvage Value = $1,000

useful life = 4years

Depreciation = ($68,400 - $1,000)/4

= $16,850

Closing balance at the end of year 1 i.e., 31st dec 2018 = $51,550

Depreciation for year 2 and 3

Balance = $51,550

balance Useful life = 2years

salvage value = $1,000

Depreciation for year 2 = ($51,550-$1,000)/2

= $25,275

Depreciation for year 3 = ($51,550-$1,000)/2

= $25,275

5.

Calculation of depreciation for the year 2018 using the units-of-production method.

Cost = $68,400

Salvage Value = $1,000

No of concerts = 200

Concerts performe for 2018 = 45

Depreciation = ($68,400-$1,000)*45/200

= $15,165

Depreciation for the year 2018 using the units-of-production method is $15,165

6.

Calculation of depreciation using straight line method for the year 1

Cost = $68,400

Salvage Value = $1,000

useful life = 4years

Depreciation = ($68,400 - $1,000)/4

= $16,850