5. A company has gross fixed assets of $15 million on Jan.1 with accumulated depreciation of...

5. A company has gross fixed assets of $15 million on Jan.1 with accumulated depreciation of $3.8 million and continuing annual depreciation expense of $300,000. On Jan.1, the firm buys a new machine costing $600,000. The new machine will be depreciated straight line over an 8 year life with no salvage value. Calculate the net fixed assets at the end of the year.

Expert Solution

Net fixed assets = Gross fixed assets - Accumulated depreciation

First we will calculate the annual depreciation expense on new machine as per below:

Under the straight line method, depreciation is calculated by the following formula:

Depreciation = Cost - Salvage value / Useful life

Cost = $600000, Salvage value = $0, useful life = 8

Depreciation = ($600000 - $0) / 8 = $75000

Under straight line method, depreciation remains the same for every year. So annual depreciation for next 8 years on this machine will be $75000.

Now, we have,

Gross fixed assets at the end of year = Gross fixed assets at the beginning + Machine purchased

Gross fixed assets at the end of year = $15m + $600000 = $15600000

Accumulated depreciation at the end of year = Beginning accumulated depreciation + Annual depreciation expense

Accumulated depreciation at the end of year = $3800000 + ($300000 + $75000) = $4175000

Net fixed assets at the end of year = Gross fixed assets - Accumulated depreciation

Net fixed assets at the end of year = $15600000 - $4175000 = $11425000

jeff jeffy answered 1 year ago

a company using straight line depreciation has an ending gross investment in fixed assets of $750,...

a company using straight line depreciation has an ending gross investment in fixed assets of $750, an accumluted depreciation of $300 and an annual depreciation expense of $150. the total depreciable life of the fixed assets and the age if the plant and equipment are respectively 5 years and 2 years 8 years and 2 years 7 years and 5 years 2 years and 5 years

Journal Entries Jan 1 Equipment with a historical cost of $10,000 and an accumulated depreciation of...

Journal Entries Jan 1 Equipment with a historical cost of $10,000 and an accumulated depreciation of $3,000 was sold for $6,000 Jan 2 Equipment with a historical cost of $20,000 and an accumulated depreciation of $18,000 was disposed of with an additional disposal cost of $1,300. Jan 2 Sanford Company borrowed $24,000 on a short-term discounted 90 day, 3.0% noninterest-bearing note payable. Jan 3 Sanford Company paid $18,000 in advance for the 6 month rental of a warehouse. Jan 3...

Notes: Depreciation for the year was recorded - $23 million for existing fixed assets. 1.) Calculate...

Notes: Depreciation for the year was recorded - $23 million for existing fixed assets. 1.) Calculate the New Depreciation necessary for the new equipment purchased this year, assuming Straight-line depreciation. HHL purchased equipment that cost $150,000 on the account. The equipment is expected to last 15 years and has no salvage value. Answer the questions below using question 1: What is the Asset Cost? xxx What is the Salvage Value? xxx What is the Asset Life? xxx...

A company has EBIT of $30 million, depreciation of $5 million, and a 40% tax rate....

A company has EBIT of $30 million, depreciation of $5 million, and a 40% tax rate. It needs to spend $15 million on new fixed assets and $5 million to increase its current assets. It expects its accounts payable to decrease by $2 million, its accruals to increase by $3 million, and its notes payable to increase by $8 million. The firm’s current liabilities consist of only accounts payable, accruals, and notes payable. What is its free cash flow?

Property purchased for ?$3 million was revalued on 1 July 2017 to ?$4.5 million. Accumulated depreciation...

Property purchased for ?$3 million was revalued on 1 July 2017 to ?$4.5 million. Accumulated depreciation at the time of revaluation was $ 500 000. The property? hadn't previously been revalued. At the time of the? revaluation, the property was expected to have a further useful life of 25 years with no residual value. On 1 July 2021 the property was again? revalued, to ?$3.3 million. Requirement Show the journal entries to? record: (a) the initial? revaluation, (b) depreciation for...

If a fixed asset with an original cost of 18,000 and accumulated depreciation of 2000 and...

If a fixed asset with an original cost of 18,000 and accumulated depreciation of 2000 and sold for 15,000 the company must

1. A machine cost $160,000, has annual depreciation expense of $32,000, and has accumulated depreciation of...

1. A machine cost $160,000, has annual depreciation expense of $32,000, and has accumulated depreciation of $80,000 on December 31, 2014. On April 1, 2015, when the machine has a fair value of $64,000, it is exchanged for a similar machine with a fair value of $192,000 and the proper amount of cash is paid. The exchange lacked commercial substance. Instructions Prepare all entries that are necessary at April 1, 2015.

ABC has accumulated $23 million in assets, operating income of $1.75 million. The tax rate is...

ABC has accumulated $23 million in assets, operating income of $1.75 million. The tax rate is 35%. It finances 25%, 50% and 75% of its assets with debt at costs of 9%,10& and 12% respectively. Discuss your results. a. Determine the ROE under three models. b. Which capital structure is best and why? c. What if EBIT increases by 10%, which capital structure is best?

Noonan Division has total assets (net of accumulated depreciation) of $2,400,000 at the beginning... Noonan Division...

Noonan Division has total assets (net of accumulated depreciation) of $2,400,000 at the beginning... Noonan Division has total assets (net of accumulated depreciation) of $2,400,000 at the beginning of year 1. One of the assets is a machine that has a net book value of $290,000. Expected divisional income in year 1 is $430,000 including $23,000 in income generated by the machine (after depreciation). Noonan’s cost of capital is 10 percent. Noonan is considering disposing of the asset today (the...

What is depreciation? What is accumulated depreciation? Whatcompanies have lots of depreciable assets? What large...

What is depreciation? What is accumulated depreciation? What companies have lots of depreciable assets? What large companies have few depreciable assets?

Question