Discuss each of the points raised by the owner

Assignment Help Accounting Basics
Reference no: EM131118219

Costs of Acquisition the invoice price of a machine is $50,000. Various other costs relating to the acquisition and installation of the machine including transportation, electrical wiring, and special base, and soon amount to $7,500 The machine has an estimated life of 10 years, with no residual value at the end of that period. The owner of the business suggests that the incidental costs of $7,500 be charged to expense immediately for the following reasons.

1. If the machine should be sold, these costs cannot be recovered in the sales price.

2. The inclusion of the $7,500 in the machinery account on the books will not necessarily result in a closer approximation of the market price of this asset over the years, because of the possibility of changing demand and supply levels.

3. Charging the $7,500 to expense immediately will reduce federal income taxes. Discuss each of the points raised by the owner of the business.(AICPA adapted)

Reference no: EM131118219

Questions Cloud

In what sense is the interest coverage ratio more a measure : In what sense is the interest coverage ratio more a measure for assessing short-term liquidity risk than it is a measure for assessing long-term solvency risk?
Identify the assumptions underlying the interest coverage : Identify the assumptions underlying the interest coverage ratio needed to make it an appropriate measure for analyzing long-term solvency risk.
Does your analysis in part a support this statement : Indicate whether each of the following independent transactions increases, decreases, or has no effect on each of the four debt ratios. The text states that analyst need not compute all four debt ratios each year because the debt ratios are highly co..
What stakeholder interests are in conflict : (a) What stakeholder interests are in conflict?(b) What ethical issues does Carter face?(c) How should these costs be allocated?
Discuss each of the points raised by the owner : Charging the $7,500 to expense immediately will reduce federal income taxes. Discuss each of the points raised by the owner of the business.(AICPA adapted)
What is the likely direction of change in cash flow : What is the likely direction of change in cash flow from operations? How would your answer be different if sales and net income were increasing?
Write a memo to the controller of company a indicating : Write a memo to the controller of Company B indicating and explaining the dollar impact on current and future statements of treating the exchange as having versus lacking commercial substance.
What is the likely explanation for these results : A firm has experienced a decrease in its current ratio but an increase in its quick ratio during the last three years. What is the likely explanation for these results?
What is the likely explanation for these results : A firm has experienced an increasing current ratio but a decreasing operating cash flow to current liabilities ratio during the last three years. What is the likely explanation for these results?

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  What is the projected net income

A proposed new investment has projected sales of $720,000. Variable costs are 60 percent of sales, and fixed costs are $161,000; depreciation is $62,000. Prepare a pro forma income statement assuming a tax rate of 30 percent. What is the projected ne..

  Stockholders equity section of a client balance sheet

Which of the following is the most important audit consideration when examining the stockholders' equity section of a client's balance sheet?

  What does it include as cash and cash equivalents

Were the dividends on common stock and/or preferred stock? What was the amount of each?

  Would the net cash flow from operating activities have been

Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method and if the direct method had been used, would the net cash flow from operating activities have been the same? Explain.

  The company is expected to operate profitably in the future

(Two Temporary Differences, One Rate, Beginning Deferred Taxes, Compute Pretax Financial Income) The following facts relate to Mc Kane Corporation.

  Question regarding the three treasury issues

1. Consider the prices of the following three Treasury issues as of February 24, 2012

  Airbus plant relocation

This week, Airbus announced it was building new plant in Alabama. Can you aid me in answering the following questions based on information in conjunction with Foreign Direct Investment.

  Budgeted variable factory overhead rate

Davie Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable factory overhead rate is $6.00 per direct labor-hour; the budgeted fixed factory overhead is $92,000 per month, of which $16..

  Strauss corporation is making a 70000 investment in

strauss corporation is making a 70000 investment in equipment with a 5-year life. the company uses the straight-line

  For which of the following itemized deductions is the tax

for which of the following itemized deductions is the tax treatment the same for regular income tax and amt

  If you had been an accountant for this company how would

summarizes your ideas about the following bull what was the nature of the controversy regarding this companys

  Glaser health products of ranier falls georgia is organized

glaser health products of ranier falls georgia is organized functionally into three divisions operations sales and

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd