hw8fsae.doc - Jaegook Lee G26205244 Due Prof Jones Eighth...

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Jaegook Lee G26205244 Due April 26, 2018 Prof. Jones Eighth Homework 1. Assume that a firm has an asset write down of $3,000,000 after concluding that the value of a building is only $4,000,000 instead of $7,000,000. Why might an analyst or other user want to adjust for that asset write down when looking at the firm’s income this year? Also, why will that asset write down lead to higher income in future years? Written-down value of the asset can be considered as an unusual economic event, so analysts would like to dismiss the effect of the impairment. In addition, since the value of asset is written down, depreciation expense next year would be decreased. Consequently, it leads income next year and tax expense next year to increase. 2. Identify which of the following unusual items (it could be more than one) are already presented net of tax so one does not need to adjust for tax to remove that item: asset write downs, discontinued operations, restructuring charges, gains on repurchasing debt, and merger-related costs.
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  • Spring '14
  • Jones,C
  • Balance Sheet, Generally Accepted Accounting Principles, The Hershey Company

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