a.
To calculate: The
Introduction:
Return on assets:
It is the financial ratio that shows the profitability of the firm in relation to the usage of resources. It can be computed by dividing a corporation’s net income to its total assets.
b.
To determine: The phenomenon that is shown in part (a).
Introduction:
Return on asset:
It is the financial ratio that shows the profitability of the firm in relation to the usage of resources. It can be computed by dividing a corporation’s net income to its total assets.
c.
To determine: The effect of increased income on return on assets.
Introduction:
Return on asset:
It is the financial ratio that shows the profitability of the firm in relation to the usage of resources. It can be computed by dividing a corporation’s net income to its total assets.
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Foundations of Financial Management
- In January 2009, the Status Quo Company was formed. Total assets were $586,000, of which $377,000 consisted of depreciable fixed assets. Status Quo uses straight-line depreciation of $37,700 per year, and in 2009 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been $59,000 per year each of the last 10 years. Other assets have not changed since 2009. a. Compute return on assets at year-end for 2009, 2011, 2014, 2016 and 2018. Note: Input your answers as a percent rounded to 2 decimal places. Year 2009 2011 2014 2016 2019 Return on Assets % % % %arrow_forwardBurrell Company purchased a machine for $33,000 on January 2, 2016. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $16,500 each year. The tax rate is 25%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asset.arrow_forwardOn January 1, 2016, the Allegheny Corporation purchased machinery for $115,000. The estimated service life of the machinery is 10 years and the estimated residual value is $5,000. The machine is expected to produce 220,000 units during its life. Required: Calculate depreciation for 2016 and 2017 using each of the following methods. Round all computations to the nearest dollar. 1. Straight line. 2. Sum-of-the-years’-digits. 3. Double-declining balance. 4. One hundred fifty percent declining balance. 5. Units of production (units produced in 2016, 30,000; units produced in 2017, 25,000).arrow_forward
- On August 1, 2015, Toy inc. purchosed a new piece of equipment that cost$25000. The estimoted useful ife is five years and the estimated residual value is 52,500 . During the five years of useful life the equpment is expected to produce 10.000 units. If the company uses the double declining bolance method of depreciation, what is the depreciation expense for the yeat ended December 31 , 2016 ? Mutiple Croice $15,000 $5,400 $8,333 $6,000 None of the other atfenatives aro correctarrow_forwardNavigation Inc. acquired an equipment on January 1, 2014 at a cost of $2,200,000 including an estimated residual value of $200,000 and twenty (20) years estimated useful life. The replacement cost of the equipment is $2,400,000 on December 30, 2017. The depreciated replacement cost declined to $1,470,000 after two years. If there is a need to gross up, round off percentage to whole number and to nearest dollar. Questions: 1. What is the carrying amount of the equipment on December 31, 2020?2. What is the balance of the revaluation surplus immediately after revaluation?arrow_forwardA company report stated that a $140,000 asset purchased 3 years ago has a current MACRS book value that is 57.6% of the asset’s basis. (a) Determine the recovery period used. (b) Determine the depreciation next year using the VDB spreadsheet function.arrow_forward
- Intella Manufacturing, Inc. has only one plant asset used in production. The asset had a cost of $535,000 and has been depreciated for 2 full years since the date of acquisition. This accounting resulted in a total accumulated depreciation of $220,000. The firm expects the asset to be productive for an additional 3 years and projects the asset's future cash flows to be $132,000 per year. Information about the company's products indicates that the asset might be impaired. Should the firm record an impairment loss for the current year? (Provide supporting computations.) First, calculate the carrying value of the asset using the table below. Less: Carrying value of asset Part 2 Next, conduct an impairment test for the asset using the table below. Step 1: Asset Impairment indicatedarrow_forward(Analysis of Subsequent Expenditures) The following transactions occurred during 2017. Assume thatdepreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year.Jan. 30 A building that cost $132,000 in 2000 is torn down to make room for a new building. The wrecking contractor was paid $5,100 and was permitted to keep all materials salvaged.Mar. 10 Machinery that was purchased in 2010 for $16,000 is sold for $2,900 cash, f.o.b. purchaser’s plant. Freight of $300 is paid on the saleof this machinery.Mar. 20 A gear breaks on a machine that cost $9,000 in 2009. The gear is replaced at a cost of $2,000. The replacement does not extend theuseful life of the machine but does make the machine more effi cient.May 18 A special base installed for a machine…arrow_forwardThe following transactions occurred during 2025. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year. Jan. 30 Mar. 10 Mar. 20 May 18 June 23 A building that cost $139,920 in 2008 is torn down to make room for a new building. The wrecking contractor was paid $5,406 and was permitted to keep all materials salvaged. Date Machinery that was purchased in 2018 for $16,960 is sold for $3,074 cash, f.o.b. purchaser's plant. Freight of $318 is paid on the sale of this machinery. A gear breaks on a machine that cost $9,540 in 2017. The gear is replaced at a cost of $2,120. The replacement does not extend the useful life of the machine but does make the machine more efficient. A special base installed for a machine in 2019 when the…arrow_forward
- The following transactions occurred during 2025. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year. Jan. 30 Mar. 10 Mar. 20 May 18 June 23 A building that cost $155,760 in 2008 is torn down to make room for a new building. The wrecking contractor was paid $6,018 and was permitted to keep all materials salvaged. Machinery that was purchased in 2018 for $18,880 is sold for $3,422 cash, fo.b. purchaser's plant. Freight of $354 is paid on the sale of this machinery. A gear breaks on a machine that cost $10,620 in 2017. The gear is replaced at a cost of $2,360. The replacement does not extend the useful life of the machine but does make the machine more efficient. A special base installed for a machine in 2019 when the machine…arrow_forwardThe following transactions occurred during 2025. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year. Jan. 30 Mar. 10 Mar. 20 May 18 June 23 A building that cost $137,280 in 2008 is torn down to make room for a new building. The wrecking contractor was paid $5,304 and was permitted to keep all materials salvaged. Date Machinery that was purchased in 2018 for $16,640 is sold for $3,016 cash, f.o.b. purchaser's plant. Freight of $312 is paid on the sale of this machinery. A gear breaks on a machine that cost $9,360 in 2017. The gear is replaced at a cost of $2,080. The replacement does not extend the useful life of the machine but does make the machine more efficient. A special base installed for a machine in 2019 when the…arrow_forwardA company purchased a piece of equipment for $30,000 on January 1, 2015. It estimates a residual value of $4,000 and a useful life of 5 years and it uses the straight-line method of depreciation. On January 1, 2017, management estimates the remaining useful life to be 4 years and the new residual value to be $3,000. What is the new annual depreciation expense as of 2017?arrow_forward
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