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nov18 - Situation I Depreciation is a matching of expense...

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Michael McCormick ACG 3103 E11-22 a $1,190,000 b Inventory $90,000 $184,000 ($100,000) $200,000 c COGS $1,380,000 $506,000 per unit material cost $23 P11-1 Cost: $76,800; N: 8; Salvage: $1200 a(1) $6,300 a(2) $15,400 a(3) $19,200 b per unit or hours P11-8 Land $274,040 65% of a(1) cost: Building $105,400 25% of Purchase $400,000 Machinery $42,160 10% of Cap. Interest $21,600 Total $421,600 Land $274,040 Building $105,400 A/D @ 10% ($5,270) B.V. Building $100,130 Machinery $42,160 A/D @ 40% ($8,432) B.V. Machinery $33,728 b c arguments for capitalization: The interest expense is a real cost of business arguments against capitalization: The interest is a cost of doing business
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Michael McCormick ACG 3103 CA11-3
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Unformatted text preview: Situation I Depreciation is a matching of expense to revenue, and depreciation is an est. if the firm was using an activity method of depreciation then no depreciation would occur. Situation II a If demand is steady the firm could use straight-line. If demand is increasing and th want to expenses more in later years then use an activity method. If demand is declining the firm could use a double-decline method. b How long will the new machine last: years, output. What is the maintenance cost. Stiuation III The firm should match expense with revanue Michael McCormick ACG 3103 Michael McCormick ACG 3103 ld the firm ....
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nov18 - Situation I Depreciation is a matching of expense...

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