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Title: Problem 10-8B
1.
2013 (a)
Jan. 1 Leasehold.......................................................................40,000
(b)
Jan. 1 Prepaid Rent..................................................................36,000
(c)
Jan. 3 Leasehold Improvements...............................................20,000
2.
2013 (a)
Dec. 31 Rent Expense.................................................................8,000
(b)
Dec. 31 Amortization Expense—Leasehold Improvements...............4,000
(c)
Dec. 31 Rent Expense.................................................................36,000
Title: Serial Problem — SP 10, Success Systems
QA_Ori:
Title: Serial Problem 1
For the three months ended March 31, 2014, depreciation expense was $400
Title: Serial Problem 2
December 31,
2013
December 31,
2014
Office Equipment.......................................... $ 8,000 $ 8,000
December 31,
2013
December 31,
2014
Computer Equipment................................... $20,000 $20,000
Title: Serial Problem 3
Total asset turnover = Net sales / Average total assets
The 3-month total asset turnover at March 31, 2014:
An estimate of its annual total asset turnover is 1.572 (0.393 x 4 quarters).
This value for the total asset turnover is lower than usual for companies
Title: Reporting in Action
QA_Ori:
Title: Reporting in Action 1
The percent of original cost remaining to be depreciated is computed by taking
the ratio of the book value of property and equipment to their original cost ($
thousands):
Title: Reporting in Action 2
In Polaris’s “Organization and Significant Accounting Policies" (Note 1:
Property and equipment) it discloses estimated useful lives by major asset
category as follows:
Asset Life (in years)
Title: Reporting in Action 3
The change in total property and equipment before accumulated depreciation
One possible explanation for the difference in these amounts is that Polaris
likely disposed of property and equipment during the year. Since the
Title: Reporting in Action 4
Total asset turnover for year ended ($ millions):
Title: Reporting in Action 5
Solution depends on the financial statement data obtained.
QA_Ori:
Title: Comparative Analysis
Note: Total asset turnover = Net sales / Average total assets
Title: Comparative Analysis 1
Total asset turnover for Polaris ($ thousands)
Total asset turnover for Arctic Cat ($ thousands)
Title: Comparative Analysis 2
Each dollar of Polaris’s assets produces $2.32 and $2.18 in net sales for the
Polaris employs its assets more efficiently than Arctic Cat for both years. In
Title: Ethics Challenge
QA_Ori:
Title: Ethics Challenge 1
When managers acquire new assets a number of decisions relative to
Title: Ethics Challenge 2
When assets are placed in use on a day other than the first day of the month
an assumption is often made that the assets are placed in use on the first day
By selecting the first day of the following month, Choi is getting a one-time
deferral of some partial months of depreciation. She is still employing a
systematic and rational method of allocating costs if she consistently chooses
Title: Ethics Challenge 3
By always assuming the first day of the following month as the date of
purchase, less depreciation is (initially) accrued for the assets employed. This
means depreciation expense will be less than if assets were considered
Title: Communicating in Practice
QA_Ori: The solution to this activity will vary based on the industry and the
Title: Taking It to the Net
Title: Taking It to the Net 1
Yahoo! has Goodwill in the amount of ($ thousands) $3,900,752 at December
31, 2011.
Title: Taking It to the Net 2
Goodwill (in $ thousands)
Total
Amount
$ Change
from Prior
Year
%
Change
Goodwill has increased over this period. The increase is due mainly to new
Title: Taking It to the Net 3
Yahoo!’s intangible assets are categorized into the three categories below at
December 31, 2011 (in thousands)
Customer, affiliate and advertiser related relationships.........................$ 93,683
Title: Taking It to the Net 4
Note 6 indicates that Trade names, trademarks, and domain names have
original estimated useful lives of “one year to indefinite lived.” If the
Yahoo! has Goodwill in the amount of ($ thousands) $3,900,752 at December
31, 2011.
Title: Teamwork in Action
QA_Ori:
Title: Teamwork in Action 1
Annual depreciation for each year of the asset’s useful life:
Year Straight-line Double-Declining-Balance Units-of-Production
2011 ($44,000-$2,000)/4
* Depreciation is based on the estimated capacity of 60,000 miles. Even though the van is driven
10,000 miles in the last year, depreciation can only be taken for the remaining 9,000 miles of
estimated capacity. This will record depreciation to the estimated salvage value.
Title: Teamwork in Action 2
Depreciation is recorded in an adjusting entry at the end of each period. The
entry is:
Depreciation Expense...................................... xxxx*
Title: Teamwork in Action 3
Each expert’s presentation of the comparison of methods will be slightly
different. The experts should make the following points: The straight-line
Title: Teamwork in Action 4
Book value at the end of each year
= Cost - Accumulated depreciation
Year Straight-line
Double-Declining-B
alance Units of Production
2011......... $33,500 $22,000 $35,600
For reporting purposes, each expert will have different results. But each
should show:
Plant Assets:
* Amounts vary by the method and the year selected for illustration. Experts should explain the
amounts shown.
Title: Entrepreneurial Decision
QA_Ori:
Part 1
(a) Under current conditions, the total asset turnover is 3.2. This is computed as
* Total asset turnover =
(b) Under this proposal, its asset turnover would increase to 4. This is computed
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
Net sales
Average total assets
*We must remember that total asset turnover is only one dimension of a complete analysis of this
proposal. For example, we would want to explore the impact of this proposal on net income and other
activities.
Title: Hitting the Road
QA_Ori: No formal solution exists for this activity. It is usually interesting for the
Title: Global Decision
Note: Total asset turnover = Net sales / Average total assets
QA_Ori:
Title: Global Decision 1
Total asset turnover for Piaggio (Euro in thousands):
Title: Global Decision 2
Piaggio was less efficient in using its assets to generate net sales than both
Polaris and Arctic Cat. Specifically, in the current year each EUR worth of
Similarly, in the prior year, each EUR’s worth of Piaggio’s assets generated
