Mgmt 200 Spring 2009 Exam Final Solution

Mgmt 200 Spring 2009 Exam Final Solution - First name Last...

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First name: ___________ Last name: ______________ PUID: ________________________ Purdue University Krannert School of Management MGMT 200 – Introductory Financial Accounting Spring 2009 Final Exam – May 8, 2009 – SOLUTION OUTLINE This exam consists of 4 questions on 12 pages (excluding this cover page and the present value table page) for a total of 100 points. Time allowed: 90 minutes. Answer all questions. To ensure full credit and to maximize partial credit, clearly show all supporting calculations. The exam is closed book. A calculator is permitted. GOOD LUCK . Question 1 (25 points) ________ Question 2 (25 points) ________ Question 3 (25 points) ________ Question 4 (25 points) ________ TOTAL (100 points) ________

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Question 1: Property, Plant, and Equipment (25 points) Part A: Griffin Industries and Heart Chemical are competitors in the heavy metal recycling industry. The following information was extracted from their annual reports for the year ended December 31, 2008. Griffin Industries Heart Chemical Plant and Equipment, at cost \$2,813,500 \$1,986,600 Accumulated depreciation \$1,547,425 \$1,572,725 Depreciation expense \$140,675 \$82,775 Both companies depreciate their plant and equipment using the straight-line method and assume a \$0 residual value on all plant and equipment. Required: For both companies compute the average economic life used to depreciate plant and equipment, the average age of their plant and equipment as at December 31, 2008, and the book value of plant and equipment as at December 31, 2008: Griffin Industries Heart Chemical Average economic life used to depreciate plant and equipment: ____ 20 years ____ ____ 24 years ____ Average age of plant and equipment as at December 31, 2008: ____ 11 years ____ ____ 19 years ____ Book value of plant and equipment as at December 31, 2008: ___ \$1,266,075 ___ _____ \$413,875 ___ Supporting calculations: (Cost – RV) / Economic life = depreciation expense Therefore Economic life = (Cost – RV) / depreciation expense Griffin = (2,813,500 – 0) / 140,675 = 20 years Heart = (1,986,600 – 0) / 82,775 = 24 years Age = Accumulated depreciation / depreciation expense Griffin = 1,547,425 / 140,675 = 11 years Heart = 1,572,725 / 82,775 = 19 years Book value = Cost – accumulated depreciation Question 1 continued over . . . Mgmt 200 – Exam 2 – Spring 2009 – page 1
Question 1 continued Part B: The following information was extracted from the annual report for Juniper Manufacturing for the year ended December 31, 2008. December 31, 2007 December 31, 2008 Plant and Equipment, at cost \$754,300 \$825,000 Accumulated Depreciation \$487,800 \$260,900 For the year ended December 31, 2008, Juniper Manufacturing reported depreciation expense on Plant and Equipment of \$56,200 and Plant and Equipment that had originally cost \$315,700 was sold for \$46,900. New plant and equipment was purchased during 2008, but there were no impairment charges reported in 2008. Required:

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Mgmt 200 Spring 2009 Exam Final Solution - First name Last...

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