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Depreciation example for cogswell cola bottling

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Unformatted text preview: la Bottling Machine – Initial cost is $1,500,00 Include installation costs, another $150,000 Property class for MACRS is 7 years Annual depreciation expense Year 1 = $1,650,000 x 0.1429 = $235,785 Year 2 = $1.650,000 x 0.2449 = $404,085 … Year 8 = $1,650,000 x 0.0445 = $73,425 Table 10.7 for all eight years Disposal of Capital Equipment Disposal When a capital asset is disposed of by a When company it can result in cash flow company Fully depreciated assets, sale price minus taxes paid Fully on gain on sale on When asset is not fully depreciated Determine current “book value” of asset Difference between sales price and book value is the gain or Difference loss on disposal loss Tax a gain and tax credit on a loss Cash flow is sales price – tax or sales price + credit Example 10.3 College Doughnuts Disposal Projected Cash Flow for Project Projected Putting all the elements together on incremental Putting cash flow for decision making on a project cash Initial Investment (typically capital spending and Initial increases in working capital) increases Annual operating cash flow Annual Disposal of equipment Decrease in working capital at conclusion of project Use Incremental Cash Flow with NPV Model IRR Model Example Bottle Water Project – Table 10.12 Problems Problems Problem 1 – Balance Sheet Accounts Problem 3 – Operating Cash Flow Problem 5 – Income Statement Problem 6 – Cash Flow from Assets Problem 7 – Cash Flow to Creditors Problem 8 – Cash Flow to Owners Problem 9 – Cash Flow Identity Problem 11 – Erosion Costs Problem 15 – Depreciation Costs...
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