Question 6 Gunther Plc provides the following information on its acquisitions of non-current assets:
(1) A non-current asset (asset a) was acquired on 1 January 2016 for £100,000. It had no residual value and a useful economic life of 10 years. On 1 January 2019, the useful economic life was revised to 6 years. The company depreciates similar assets using the straight line method.
(2) A non-current asset (asset b) was acquired for £12,500 at the beginning of 2017. It had a useful economic life of 5 years and no residual value. On 1 January 2019 the asset was revalued to £15,000. The useful economic life remains unchanged. The company depreciates similar assets using the straight line method.
(3) A non-current asset (asset c) was acquired for £25,000 at the beginning of 2017. It had a useful economic life of 5 years and no residual value. On 1 January 2019 the asset was revalued to £30,000. The useful economic life remains unchanged. Asset c was sold on 31 December 2019 for £16,000. The company depreciates similar assets using the straight line method.
Required:
(a) How would each of the transactions (1) to (3) be accounted for in 2019?
(b) Compare and contrast accounting for tangible assets with that for intangible assets. Your answer to this part of the question should not be more than 200 words.
In: Accounting
QUESTION 2
The list of accounts and balances for Stewart Car Servicing Pty Ltd for the year ended 30 June 2015 is presented below.
|
ACCOUNT |
$ |
|
Accounts Payable |
8,000 |
|
Accumulated Depreciation - Building |
12,000 |
|
Bank Loan |
80,000 |
|
Building |
70,000 |
|
Capital |
20,000 |
|
Cash |
33,000 |
|
Cost of Sales |
30,000 |
|
Depreciation Expense |
4,000 |
|
Dividends |
2,000 |
|
Inventory |
26,000 |
|
Land |
80,000 |
|
Other Expenses |
18,000 |
|
Rent Revenue |
30,000 |
|
Rent Revenue Received in Advance |
2,000 |
|
Retained Earnings 1/7/2014 |
74,000 |
|
Salaries Expense |
25,000 |
|
Sales Revenue |
62,000 |
Required:
Prepare a Statement of Profit or Loss for the year.
Prepare a Calculation of Retained Earnings for the year.
Prepare a classified Statement of Financial Position for the year.
|
Stewart Car Servicing Pty Ltd Statement of Profit or Loss for the year ended 30 June 2015 |
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|
$ |
$ |
|
|
Revenues: |
||
|
Expenses: |
||
|
Stewart Car Servicing Pty Ltd Calculation of Retained Earnings for the year ended 30 June 2015 |
|
|
$ |
|
|
Stewart Car Servicing Pty Ltd |
|||
|
Statement of Financial Position |
|||
|
as at 30 June 2015 |
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|
$ |
$ |
$ |
|
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Current Assets: |
|||
|
Total Current Assets |
|||
|
Non-Current Assets: |
|||
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Total Non-Current Assets |
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Total Assets |
|||
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Current Liabilities: |
|||
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Total Current Liabilities |
|||
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Non-Current Liabilities |
|||
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Total Non-Current Liabilities |
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Total Liabilities |
|||
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Net Assets |
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Equity |
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Total Equity |
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(Total marks for Question 2 = 17 marks)
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Income Statement for Fiscal Years Endings
(in Millions, except per share amounts)
|
Report Date |
06/30/2019 |
06/30/2018 |
06/30/2017 |
|
Net sales |
$67,684 |
$66,832 |
$65,058 |
|
Cost of products sold |
34,768 |
34,268 |
32,535 |
|
Gross profit |
$32,916 |
$32,564 |
$32,523 |
|
Selling, general & administrative expense |
19,084 |
18,853 |
18,568 |
|
Goodwill & indefinite lived intangible asset impairment charges |
8,345 |
0.00 |
0.00 |
|
Operating income |
$5,487 |
$13,711 |
$13,955 |
|
Interest expense |
509 |
506 |
465 |
|
Interest income |
220 |
247 |
171 |
|
Other non-operating income (expense), net |
871 |
-126 |
-404 |
|
Earnings from continuing operations before income taxes |
$6,069 |
$13,326 |
$13,257 |
|
Income taxes expense on continuing operations |
2,103 |
3,465 |
3,063 |
|
Net earnings from continuing operations |
$3,966 |
$9,861 |
$10,194 |
|
Net earnings (loss) from discontinued operations |
0.00 |
0.00 |
5,217 |
|
Net income (loss) |
$3,966 |
$9,861 |
$15,411 |
|
Less: net earnings attributable to noncontrolling interests |
-69 |
-111 |
-85 |
|
Net earnings attributable to Procter & Gamble Co. |
$3,897 |
$9,750 |
$15,326 |
|
Earning per share information: |
|||
|
Earnings (loss) per share from continuing operations - basic |
$1.45 |
$3.75 |
$3.79 |
|
Earnings (loss) per share from discontinued operations - basic |
0.00 |
0.00 |
2.01 |
|
Net earnings (loss) per share - basic |
$1.45 |
$3.75 |
$5.80 |
|
Earnings (loss) per share from continuing operations - diluted |
$1.43 |
$3.67 |
$3.69 |
|
Earnings (loss) per share from discontinued operations - diluted |
0.00 |
0.00 |
1.90 |
|
Net earnings (loss) per share - diluted |
$1.43 |
$3.67 |
$5.59 |
|
Other Key Metrics |
|||
|
Dividends per common share |
$2.90 |
$2.79 |
$2.70 |
|
Total number of employees |
97,000 |
92,000 |
95,000 |
Vertical Analysis for Fiscal Years Endings
(in Millions, except per share amounts)
|
For Fiscal Years Ending |
Percentages of Annual Revenue |
|||||
|
Report Date |
06/30/2019 |
06/30/2018 |
06/30/2017 |
06/30/2019 |
06/30/2018 |
06/30/2017 |
|
Net sales |
$67,684 |
$66,832 |
$65,058 |
100.00% |
100.00% |
100.00% |
|
Cost of products sold |
34,768 |
34,268 |
32,535 |
51.37% |
51.27% |
50.01% |
|
Gross profit |
$32,916 |
$32,564 |
$32,523 |
48.63% |
48.73% |
49.99% |
|
Selling, general & administrative expense |
19,084 |
18,853 |
18,568 |
28.20% |
28.21% |
28.54% |
|
Goodwill & indefinite lived intangible asset impairment charges |
8,345 |
0.00 |
0.00 |
12.33% |
0.00% |
0.00% |
|
Operating income |
$5,487 |
$13,711 |
$13,955 |
8.11% |
20.52% |
21.45% |
|
Interest expense |
509 |
506 |
465 |
0.75% |
0.76% |
0.71% |
|
Interest income |
220 |
247 |
171 |
0.33% |
0.37% |
0.26% |
|
Other non-operating income (expense), net |
871 |
-126 |
-404 |
1.29% |
-0.19% |
-0.62% |
|
Earnings from continuing operations before income taxes |
$6,069 |
$13,326 |
$13,257 |
8.97% |
19.94% |
20.38% |
|
Income taxes expense on continuing operations |
2,103 |
3,465 |
3,063 |
3.11% |
5.18% |
4.71% |
|
Net earnings from continuing operations |
$3,966 |
$9,861 |
$10,194 |
5.86% |
14.75% |
15.67% |
|
Net earnings (loss) from discontinued operations |
0.00 |
0.00 |
5,217 |
0.00% |
0.00% |
8.02% |
|
Net income (loss) |
$3,966 |
$9,861 |
$15,411 |
5.86% |
14.75% |
23.69% |
|
Less: net earnings attributable to noncontrolling interests |
-69 |
-111 |
-85 |
-0.10% |
-0.17% |
-0.13% |
|
Net earnings attributable to Procter & Gamble Co. |
$3,897 |
$9,750 |
$15,326 |
5.76% |
14.59% |
23.56% |
briefly summarize your observations about changes, i.e. financial trends, in the following Income Statement line items for the Vertical Analysis:
In: Accounting
Porter Industries Inc. began 2018 with total stockholders’ equity of $40 million. Due to a large acquisition of treasury stock and the payment of a $10 million cash dividend, the company ended that year with stockholders’ equity of only $5 million. For the year ended December 31, 2018, Porter reported net income of $10 million. What is the company's return on equity?
10%
2.25%
44.4%
Not enough information to determine
In: Accounting
On May 5, 2017, Lloyd purchased a machine for $84,000. The estimated life of the machine was 10 years, with an estimated residual value of $10,000. The service life in terms of “output” is estimated at 8,000 hours of operation. Assume Lloyd uses the units-of-output method and that the machine was in operation for 1,000 hours in 2017 and 1,800 hours in 2018. The book value of the machine at December 31, 2018 is:
$48,100
$56,700
$25,900
$58,100
In: Accounting