Question
In: Finance
Assume that Besley Golf Equipment commenced operations on January 1, 2015, and it was granted permission...
Assume that Besley Golf Equipment commenced operations on January 1, 2015, and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes. The company planned to depreciate its fixed assets over 15 years, but in December 2015 management realized that the assets would last for only 10 years. The firm's accountants plan to report the 2015 financial statements based on this new information. How would the new depreciation assumption affect the company’s financial statements?
| a. |
The firm’s reported 2015 earnings per share would increase. |
|
| b. |
The firm’s reported net fixed assets would increase. |
|
| c. |
The firm’s EBIT would increase. |
|
| d. |
The provision will increase the company's tax payments. |
|
| e. |
The firm’s cash position in 2015 and 2016 would increase. |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
On 1 January 20X7, Change Incorporated commenced business operations. At 31
On 1 January 20X7, Change Incorporated commenced business operations. At 31 December 20X9, the following information relates to Chang: 20X7 20X8 20X9 Earnings (loss) before tax $ 334,900 $ (486,100 ) $ 785,000 Tax rate (enacted in each year) 30 % 35 % 40 % Depreciation expense (asset cost was $730,000) 63,000 63,000 63,000 Capital cost allowance 219,000 0 91,000 Dividends received (nontaxable) 41,000 66,500 66,500 Golf club dues 10,900 10,900 10,900 Required:1. Prepare journal entries to record tax for...
2. On January 1, 2015, Sizzler’s Corporation was granted a charter that authorized the issuance of...
2. On January 1, 2015, Sizzler’s Corporation was granted a
charter that authorized the issuance of 100,000 shares of $5 par
value ordinary shares and 20,000 shares of $80 par value, 6%
cumulative and non-participating preference shares. During the
year, the following transactions took place.
Jan 15 The Corporation issued 18,000 ordinary shares at $10 per
share.
Feb 9 Issued 3,000 ordinary shares to attorneys in payment for
services rendered in the company’s incorporation. The bill amounted
to $20,000.
Mar...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at...
On January 1 of the current year, Townsend Co. commenced
operations. It operated its plant at 100% of capacity during
January. The following data summarized the results for January:
Units
Production
50,000
Sales ($18 per unit)
42,000
Inventory, January 31
8,000
Manufacturing costs:
Variable
$575,000
Fixed
80,000
Total
$655,000
Selling and administrative expenses:
Variable
$35,000
Fixed
10,500
Total
$ 45,500
Labels
Fixed costs
For Month Ended January 31, 20--
Amount Descriptions
Contribution margin
Cost of goods manufactured
Cost of goods...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at...
On January 1 of the current year, Townsend Co. commenced
operations. It operated its plant at 100% of capacity during
January. The following data summarized the results for
January:
Units
Production
50,000
Sales ($18 per unit)
42,000
Inventory, January 31
8,000
Manufacturing costs:
Variable
$575,000
Fixed
80,000
Total
$655,000
Selling and administrative expenses:
Variable
$35,000
Fixed
10,500
Total
$45,500
a. Prepare an income statement using absorption
costing.
Townsend
Co.
Absorption
Costing Income Statement
For Month
Ended January 31, 20--
$...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at...
On January 1 of the
current year, Townsend Co. commenced operations. It operated its
plant at 100% of capacity during January. The following data
summarized the results for January:
Units
Production
50,000
Sales ($18 per unit)
42,000
Inventory, January 31
8,000
Manufacturing costs:
Variable
$575,000
Fixed
80,000
Total
$655,000
Selling and administrative expenses:
Variable
$35,000
Fixed
10,500
Total
$45,500
a.
Prepare an income statement using absorption costing.
Townsend
Co.
Absorption
Costing Income Statement
For Month
Ended January 31, 20--
$...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at...
On January 1 of the current year, Townsend Co. commenced
operations. It operated its plant at 100% of capacity during
January. The following data summarized the results for
January:
Units
Production
50,000
Sales ($18 per unit)
(42,000)
Inventory, January 31
8,000
Manufacturing costs:
Variable
$575,000
Fixed
80,000
Total
$655,000
Selling and administrative expenses:
Variable
$35,000
Fixed
10,500
Total
$45,500
a. Prepare an income statement using absorption
costing.
Townsend Co.
Absorption Costing Income Statement
For the Month Ended January 31
$...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at...
On January 1 of the current year, Townsend Co. commenced
operations. It operated its plant at 100% of capacity during
January. The following data summarized the results for
January:
Units
Production
50,000
Sales ($18 per unit)
42,000
Inventory, January 31
8,000
Manufacturing costs:
Variable
$575,000
Fixed
80,000
Total
$655,000
Selling and administrative expenses:
Variable
$35,000
Fixed
10,500
Total
$45,500
a. Prepare an income statement using absorption
costing.
Townsend Co.
Absorption Costing Income Statement
For Month Ended January 31, 20--
$...
Sunderland Company commenced business operations on January 1, 2017. During its first two years of operations,...
Sunderland Company commenced business operations on January 1,
2017. During its first two years of operations, the company
completed transactions involving sales on credit, accounts
receivable collections, and bad debts. On December 31, 2017, its
Accounts Receivable account and Allowance for Doubtful Accounts
account had a balance of $2,090,000 and $37,620 respectively. The
transactions for 2018 are summarized as follows.
a. Sold $2,845,000 of merchandise (that had cost $1,730,000) on
credit, terms n/30.
b. Wrote off $95,300 of uncollectible accounts...
On January 1, 2015 Carter Company granted a total of 10,000 stock options to 10 company...
On January 1, 2015 Carter Company granted a total of 10,000
stock options to 10 company officers. Each option can be used to
purchase one share of the company’s $1 par value common stock at
$20 per share. The options are additional compensation for work to
be performed over the next two years. They are
exercisable during a 5-year period beginning on January 1, 2017.
The Magic option-pricing model determines total compensation
expense related to these options to be $90,000....
3. On January 1, 2015 Carter Company granted a total of 10,000 stock options to 10...
3. On January 1, 2015 Carter Company granted a total of 10,000
stock options to 10 company officers. Each option can be used to
purchase one share of the company’s $1 par value common stock at
$20 per share. The options are additional compensation for work to
be performed over the next two years. They are
exercisable during a 5-year period beginning on January 1, 2017.
The Magic option-pricing model determines total compensation
expense related to these options to be...
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