Problem 8-8B (20 minutes)
1.
(b)
Jan. 1 Prepaid Rent…………….……………..………….….….…….….36,000
Cash………………………………………..…………………….. 36,000
To record prepaid annual lease rental.
(c)
Jan. 3 Leasehold Improvements……………..…………….…….….20,000
Cash………………………………………..…………………….. 20,000
To record costs of leasehold improvements.
2.
(c)
Dec. 31 Rent Expense…………………………..………………….……….36,000
Prepaid Rent………………………………….…….….….…. 36,000
To record annual lease rental.
Serial Problem — SP 8
Serial Problem — SP 8, Business Solutions (45 minutes)
1. For the three months ended March 31, 2016, depreciation expense was
$400 for office equipment and $1,250 for the computer equipment.
2.
December 31,
2015
December 31,
2016
Office Equipment………….…………………..…. $ 8,000 $ 8,000
Accumulated Depreciation–Office
December 31,
2015
December 31,
2016
Computer Equipment…………………….….…. $20,000 $20,000
Accumulated Depreciation–
3.
Total asset turnover = Net sales / Average total assets
The 3-month total asset turnover at March 31, 2016:
An estimate of its annual total asset turnover is 1.73 (0.432 x 4
quarters). This value for the total asset turnover is lower than usual for
Financial and Managerial Accounting, 6th Edition
500
Reporting in Action — BTN 8-1
1. The percent of original cost remaining to be depreciated is computed
by taking the ratio of the book value of property and equipment to the
original cost ($ millions):
2. In Apple’s “Summary of Significant Accounting Policies” (Note 1:
Property, Plant and Equipment) it discloses estimated useful lives by
major asset category as follows:
Asset Life (in years)
3. The change in total property and equipment before accumulated
depreciation for the year ended September 28, 2013, is an increase of
$6,632 million ($28,519 – $21,887). In comparison, according to the
statement of cash flows, $8,165 million cash is used for the purchase of
property and equipment.
4. Total asset turnover for year ended ($ millions):
5. Solution depends on the financial statement data obtained.
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$170,910
($176,064 + $116,371)/2
Comparative Analysis — BTN 8-2
Note: Total asset turnover = Net sales / Average total assets
1. Total asset turnover for Apple ($ millions)
Current Year: = 0.89 times
Prior Year: = 1.07 times
$170,910
($207,000 + 176,064)/2
$156,508
($176,064 + $116,371)/2
Ethics Challenge — BTN 8-3
1. When managers acquire new assets a number of decisions relative to
2. When assets are placed in use on a day other than the first day of the
month an assumption is often made that the assets are placed in use on
the first day of the month nearest to the date of the purchase. For
example, for assets purchased on the 1st through 15th days of the month,
3. By always assuming the first day of the following month as the date of
purchase, less depreciation is (initially) accrued for the assets
employed. This means depreciation expense will be less than if assets
Communicating in Practice — BTN 8-4
The solution to this activity will vary based on the industry and the
companies chosen for analysis. Many instructors find it useful to report
the results from the teams to the class for purposes of classroom
discussion and analysis.
Taking It to the Net — BTN 8-5
1. Yahoo! has Goodwill in the amount of ($ thousands) $4,679,648 at
December 31, 2013.
2.
Goodwill (in $ thousands)
Total
Amount
$ Change
from Prior
Year
%
Change
Balance, December 31, 2012….….….….…..$3,826,749
Balance, December 31, 2013….….….….…..$4,679,648 $852,899 22.3%
3. Yahoo!’s intangible assets are categorized into the three categories
below at December 31, 2013. These intangibles represent 2.5%
($417,808 / $16,804,959) of total assets.
December 31, 2013 (in thousands)
Customer, affiliate and advertiser related relationships.….............$ 205,818
4. Note 6 indicates that Trade names, trademarks, and domain names
have original estimated useful lives of “one year to an indefinite life.” If
the trademarks and trade names have been registered with the
Teamwork in Action — BTN 8-6
1. Annual depreciation for each year of the asset’s useful life:
Year Straight-line Double-Declining-Balance Units-of-Production
2013 ($44,000-$2,000)/4
= $10,500
(100%/4) x 2 = 50% is
declining-balance rate.
BV x rate = $44,000 x 50%
= $22,000
($44,000-$2,000)/60,000 miles
= $.70 per mile.
12,000 miles x $.70 = $ 8,400
2. Depreciation is recorded in an adjusting entry at the end of each period.
The entry is:
3. Each expert’s presentation of the comparison of methods will be
slightly different. The experts should make the following points: The
straight-line method reduces net income by the same amount each
Teamwork in Action — BTN 8-6 – continued
Year Straight-line
Double-Declining-
Balance Units of Production
2013……… $33,500 $22,000 $35,600
2014………
……….
……….
23,000 11,000 23,000
For reporting purposes, each expert will have different results. But
each should show:
Plant Assets:
Transport Van………………..……………………….….…….… $44,000
Less: Accumulated Depreciation....... XXXX*
Entrepreneurial Decision — BTN 8-7
Part 1
(a) Under current conditions, the total asset turnover is 3.2. This is
computed as net sales of $8,000,000 divided by its average total assets
of $2,500,000.* This means the company turns its assets over 3.2 times
(b) Under this proposal, its asset turnover would increase to 4. This is
computed by taking its net sales of $12,000,000 ($8,000,000 +
$4,000,000) and dividing by its average total assets of $3,000,000. This
Part 2
The proposal would yield an improved total asset turnover of 4 vis-à-vis the
current total asset turnover of 3.2. However, we need to recognize that this
proposal depends on our confidence in both maintaining current sales,
meeting future sales expectations, and not losing or alienating current
Hitting the Road — BTN 8-8
No formal solution exists for this activity. It is usually interesting for the
Global Decision — BTN 8-9
1. Total asset turnover for Samsung (KRW in millions):
Current Year: = 1.16 times
₩228,692,667
(₩214,075,018+ ₩181,071,570)/2