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Unformatted text preview: ACCT Professor William Chapter 5 Homework Page 223 PB5-1 a. Dr Cash.................................440 Cr Regal Revenue b. Dr Property and Equipment..........27 Cr Cash c. Dr Dividends...........................41 Cr Cash d Dr Depreciation Expense.............75 Cr Cash Transaction A B C D PB5-2 Transaction A B C D Balance Assets + +/Sheet Liabilites NE NE NE NE 440 27 41 75 Revenues + NE NE NE Income Expenses NE NE NE + Statement Net Income + NE NE - Stockholders' Equity NE NE + NE Debt-to-Assets NE + + Asset Turnover + NE + + Net Profit Margin + NE NE - C&DS5-5 1. Debt-to-Assets and Asset turnover are the two ratios that will be affected by recordings costs as an asset rather than an expense. The ratio of Debt-to-Assets would decrease and the ration of asset turnovers would also decrease. 2. Machinery installation should not be considered an asset since this does not specifically apply to equipment or supplies. Like the old accounting clerk had recorded it, the machinery installation should be considered an expense since without it the people coming in and properly installing the new machinery, the company would not be able to use it. The machinery itself could be considered an asset; however the installation process is considered an expense. 3. It would important for me to inform the CFO of exactly what assets are considered compared to expenses. The expense of having people come and install the machinery properly will have no future benefit after the machines are correctly ready for use, which will force them not to be labeled as an asset. In this case that is why the installation of the machinery should be considered an expense. ...
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