Green Co. constructed a machine at a total cost of $60.90 million. Construction was completed at the end of 2017 and the machine was placed in service at the beginning of 2018. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $3.30 million. At the beginning of 2021, Green decided to change to the straight-line method.

Required:
1. Ignoring income taxes, what journal entry(s) should Green record relating to the machine for 2021?
2. Suppose Green has been using the straight-line method and switches to the sum-of-the-years’-digits method. Ignoring income taxes, what journal entry(s) should Green record relating to the machine for 2021?

Irwin, Inc. constructed a machine at a total cost of $23 million. Construction was completed at the end of 2017 and the machine was placed in service at the beginning of 2018. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $3 million. At the beginning of 2021, Irwin decided to change to the sum-of-the-years’-digits method.

Ignoring income taxes, prepare the journal entry relating to the machine for 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).)
  
journal entry

Record the entry relating to the machine for 2021.

Irwin, Inc., constructed a machine at a total cost of $57 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $2 million. At the beginning of 2018, Irwin decided to change to the straight-line method.

Ignoring income taxes, prepare the journal entry relating to the machine for 2018. Irwin, Inc., constructed a machine at a total cost of $57 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $2 million. At the beginning of 2018, Irwin decided to change to the straight-line method.

Ignoring income taxes, prepare the journal entry relating to the machine for 2018.

Irwin, Inc., constructed a machine at a total cost of $41 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $3 million. At the beginning of 2018, Irwin decided to change to the sum-of-the-years’-digits method.

Ignoring income taxes, prepare the journal entry relating to the machine for 2018.

The Construction cost of the bypass is 20 million and 500,000 would be required each year for annual maintenance. The annual benefits to the public have been estimated to be 2 million. If the study period is 50 years and the government interest rates is 8% per year, a.) Should the bypass be constructed? B.)What impact does a social interest rate of 4% per year have on the B-C ratio of the project

Edwards Construction currently has debt outstanding with a market value of $390,000 and a cost of 7 percent. The company has an EBIT of $27,300 that is expected to continue in perpetuity. Assume there are no taxes.

a. What is the value of the company’s equity and the debt-to-value ratio? (Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

b. What is the equity value and the debt-to-value ratio if the company's growth rate is 3 percent? (Do not round intermediate calculations. Round your equity value to 2 decimal places, e.g., 32.16, and round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

c. What is the equity value and the debt-to-value ratio if the company's growth rate is 5 percent? (Do not round intermediate calculations. Round your equity value to 2 decimal places, e.g., 32.16, and round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

Exercise 11-12

In 1993, Nash Company completed the construction of a building at a cost of $2,040,000 and first occupied it in January 1994. It was estimated that the building will have a useful life of 40 years and a salvage value of $59,200 at the end of that time.

Early in 2004, an addition to the building was constructed at a cost of $510,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $20,400.

In 2022, it is determined that the probable life of the building and addition will extend to the end of 2053, or 20 years beyond the original estimate.

A.) Using the straight-line method, compute the annual depreciation that would have been charged from 1994 through 2003.(Per year)

B.) Compute the annual depreciation that would have been charged from 2004 through 2022. (Per year)

C.) Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2021. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

D.) Compute the annual depreciation to be charged, beginning with 2022. (Round answer to 0 decimal places, e.g. 45,892.)

Green Co. constructed a machine at a total cost of $70 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $4 million. At the beginning of 2018, Green decided to change to the straight-line method.

Required:
1. Ignoring income taxes, what journal entry(s) should Green record relating to the machine for 2018?
2. Suppose Green has been using the straight-line method and switches to the sum-of-the-years’-digits method. Ignoring income taxes, what journal entry(s) should Green record relating to the machine for 2018?

Journal entry

1. Record the entry relating to the machine for 2018 using straight-line method

2. Record the entry relating to the machine for 2018 using sum-of-the year's digits method

SL BLUE , a construction company, is planning to acquire new earthmoving equipment at a cost of R150 million, and is considering how to finance the acquisition. The company can either lease or purchase the equipment.

The following information relates to these two options:

1. Purchase:

The company can purchase the equipment through a bank loan for the full cost of the equipment, repayable over five years in equal annual instalments incorporating interest at a rate of 11.39% per annum.

The equipment qualifies for a depreciation deduction of 40% of cost in the first year and 20% of cost in each year for the subsequent three years.

The useful life of the equipment is five years, at the end of which the equipment is expected to have a residual value equal to one third of its cost.

If the company purchases the equipment, it will spend R5 million per year on insurance and maintenance costs.

2. Lease:

The company can lease the equipment at an annual lease rental cost of R45 million, payable in advance over five years.

The tax deduction relating to the lease payments will occur at the end of each year.

Under the lease agreement, the lessor will be responsible for the insurance and maintenance of the equipment. The (CEO) has a friend visiting from overseas, who has advised that it would be preferable to lease the equipment rather than buy it.

The friend’s argument is that leasing would prevent SL BLUE own capital being tied up, since it would be the lessor who would buy and own the equipment.

SL BLUE is highly geared, and the friend has also suggested that leasing the equipment instead of borrowing to buy it would make SL BLUE balance sheet look better.

As an example of the convenience of leasing, the friend points to the rental car they have been using while visiting South Africa.

The corporate tax rate is 28%.

DO THE CALCULATIONS TO CHOOSE THE CORRECT OPTION AND EXPLAIN THE ADVANTAGES OF THE OPTION - PLEASE STEP BY STEP AS I NEED TO UNDERSTAND THIS BETTER

Option 1: Building a new refinery

The construction and installation of a new refinery will cost $22 million. In addition, a processing plant will also need to be constructed at a cost $6 million. This plant will need to be supplied with grinding machines, DMS flotation machines and other equipment at a total cost of $16 million. Kidman Resources’ current fleet of Haul trucks, water carts and dump trucks will meet the needs for this project, however until recently, the fleet has been earning a rental income of $120,000 per year.

Under the agreement with Tesla inc., the lithium mined is expected to generate a revenue of $15 million per year, which will increase by 2.8% per annum adjusted for rising costs. Due to the additional complexities involved with the construction and management of this new refinery, 5 new engineers (yearly salary per engineer $160,000) will replace 5 existing engineers (yearly salary per engineer $120,000). All other remaining labour force required is expected to cost $3 million per annum for the duration of the project.

For tax reasons you will expense the cost of the processing plant immediately. The cost for the construction and installation of the new refinery and associated machines and equipment will be depreciated over three years using the straight-line method. Due to the nature of the mining project, the machines and equipment will likely have a salvage value of $10 million at the end of three years. Finally, the required net working capital is $2 million.

Option 2: Outsourcing the supply of ore

Alternatively, Kidman Resources can contract BHP to supply the required ore to process into lithium hydroxide. Based on the required amount of lithium hydroxide, management has quoted a total cost of $28 million. BHP has however offered this rate on the condition that Kidman Resources pays 20% of the total cost in advance in the beginning of the year, with the remaining paid in equal instalments thereafter. Kidman Resources will process the ore into lithium hydroxide using existing facilities at an expected cost of $4.4 million per year.

Calculate NPV for option 1 and 2. Tax rate= 28%, discount rate= 10%