Ch 07 revised part 02

Ch 07 revised part 02 - 1 2 3 Year 0 1 2 3 4 Balance Sheet...

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Year Balance Sheet (Asset, net of accumulated depreciation) Income Statement (Depreciation Expense Using SL) 4 0 $12,000 1 $12,000 – $2,500 = $9,500 $10,000/4 = $2,500 2 $12,000 – $5,000 = $7,000 $2,500 3 $12,000 – $7,500 = $4,500 $2,500 4 $12,000 – $10,500 = $2,000 $2,500 Depreciation expense is the same each period if the company uses straight-line depreciation whereas accelerated methods take more depreciation in the early years and less in the later years. However, both methods expense the same amount in total. Year Balance Sheet (Asset, net of accumulated depreciation) Income Statement (Depreciation Expense Using Accelerated Method) 0 $12,000 1 $12,000 – $6,000 = $6,000 $6,000 2 $12,000 – $9,000 = $3,000 $3,000 3 $12,000 – $10,000 = $2,000 $1,000 4 $12,000 – $10,000 = $2,000 -0-
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Why does ROA appear to improve over time? 5
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Note that in Year 1, tax expense on the income statement is $60,000 even though no 8 taxes are currently due on the tax return. Tax expense is just like any other
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This note was uploaded on 10/13/2010 for the course ACCT 5993 taught by Professor Gooch during the Fall '10 term at Cameron University.

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Ch 07 revised part 02 - 1 2 3 Year 0 1 2 3 4 Balance Sheet...

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