ADMS 2500 Study Guide - Intangible Asset, Gross Margin, Income Statement

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violeteel391

29 Mar 2014

School

York University

Department

Administrative Studies

Course

ADMS 2500

Professor

all

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ADMS 2500 Full Course Notes

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Statfall ltd. buys a building on april 1, 1995 for ,000. The building will last for 50 years, but bigger expects to use the building for 30 years. At the end of 50 years the building will have no disposal value, but it is expected to have a ,000 disposal value at the end of 30 years. The depreciation expense at for the year- ended december 31,2003 is: , ,000, ,000, , none of the above. Bongo had constructed a small building for ,000 on january 1, 1998 . When the building was built it was expected to be used for 8 years and then be sold for ,000 . At the beginning of january , 2000, a ,000 addition was made to the building so it would be useful until. December 31,2009 at which time it is expected to be sold for ,000 .

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Sonjaand Sons, Inc., owns and operates a group of apartment buildings.Management wants to sell one of its older four-family buildings andbuy a new building. Theold building, which was purchased 25 years ago for $100,000, has a40-year estimated life. The current market value is $80,000, and ifit is sold, the cash inflowwill be $67,675. Annualnetcash inflowsfromthe old building are expected to average $16,000 for the remainderof its estimated useful life.

Thenew building will cost $300,000. It has an estimated useful life of25 years. Net cash inflows are expected to be $50,000 annually.

Assumethat (1) all cash flows occur at year end, (2) the company usesstraightline depreciation, (3) the buildings will have a residualvalue equal to 10 percentof their purchase price, and (4) the minimum rate of return is 14percent. UseTable1andTable 2inthe appendix onpresentvaluetables.

a.Compute the present value of future cash flows from the oldbuilding.

b.What will the net present value of cash flows be if the companypurchases the new building?

c.Should the company keep the old building or purchase the newone?

ultramarinelion172

In 1990, Marigold Company completed the construction of abuilding at a cost of $2,240,000 and first occupied it in January1991. It was estimated that the building will have a useful life of40 years and a salvage value of $67,200 at the end of that time.Early in 2001, an addition to the building was constructed at acost of $560,000. At that time, it was estimated that the remaininglife of the building would be, as originally estimated, anadditional 30 years, and that the addition would have a life of 30years and a salvage value of $22,400. In 2019, it is determinedthat the probable life of the building and addition will extend tothe end of 2050, or 20 years beyond the original estimate.

1. Using the straight-line method, compute the annualdepreciation that would have been charged from 1991 through2000.

Annual depreciation from 1991 through 2000 $ / yr.

2. Compute the annual depreciation that would have been chargedfrom 2001 through 2018.

Annual depreciation from 2001 through 2018 $ / yr.

3. Prepare the entry, if necessary, to adjust the accountbalances because of the revision of the estimated life in 2019. (Ifno entry is required, select "No entry" for the account titles andenter 0 for the amounts. Credit account titles are automaticallyindented when amount is entered. Do not indent manually.)

4. Compute the annual depreciation to be charged, beginning with2019. (Round answer to 0 decimal places, e.g. 45,892.)

Annual depreciation expenseâbuilding $

In January 2013, Mitzu Co. pays $2,700,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $579,500, with a useful life of 20 years and an $90,000 salvage value. A lighted parking lot near Building 1 has improvements (Land Improvements 1) valued at $549,000 that are expected to last another 18 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,921,500. The company also incurs the following additional costs:


Cost to demolish Building 1	$	338,400
Cost of additional land grading		187,400
Cost to construct new building (Building 3), having a useful life of 25 years and a $400,000 salvage value		2,282,000
Cost of new land improvements (Land Improvements 2) near Building 2 having a 20-year useful life and no salvage value		173,000

value:
10.00 points

Required information

Required:

1.	Allocate the costs incurred by Mitzu to the appropriate columns and total each column.

Allocation of purchase price	Appraised Value	Percent of Total Appraised Value	x	Total cost of acquisition	=	Apportioned Cost
Land			x		=
Building 2			x		=
Land Improvements 1			x		=
Totals

	Land	Building 2		Building 3		Land Improvements 1	Land Improvements 2
Purchase Price
Demolition
Land grading
New building (Construction cost)
New improvements cost
Totals

Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2013.

2.Journal entry worksheet

Record the costs of the plant assets.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
Jan 01

3.	Using the straight-line method, prepare the December 31 adjusting entries to record depreciation for the 12 months of 2013 when these assets were in use.

Record the year-end adjusting entry for the depreciation expense of Building 2.

Date	General Journal	Debit	Credit
Dec 31

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ADMS 2500 Study Guide - Intangible Asset, Gross Margin, Income Statement

ADMS 2500 Full Course Notes

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