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Computing and Revising Revenues and Capital Expenditures

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Please provide information on how to process computing and revising depreciation; revenue and capital expenditures. A sample template or the link to a similar problem from the solution library would be helpful.

Fundamental Accounting Principals, 18th Edition
Wild, Larson, Chiappetta, McGraw-Hill Irwin

Problem 10-3A: Computing and revising depreciation; revenue and capital expenditures.

Champion Contractors completed the following transactions and events involving the purchase and operation of equipment in its business.

2007

Jan. 1 Paid $287,600 cash plus $11,500 in sales tax and $1,500 in transportation (FOB
shipping point) for a new loader. The loader is estimated to have a four-year life
and a $20,600 salvage value. Loader cost are recorded in the Equipment account.
Jan. 3 Paid $4,800 to enclose the cab and install air conditioning in the loader to enable
operations under harsher conditions. This increased the estimated salvage value
of the loader by another $1,400.
Dec. 31 Recorded annual straight-line depreciation on the loader.

2008

Jan. 1 Paid $5,400 to overhaul the loader's engine, which increased the loader's
estimated useful life by two years.
Feb. 17 Paid $820 to repair the loader after the operator backs it into a tree.
Dec. 31 Recorded annual straight-line depreciation on the loader.

Required: Prepare journal entries to record these transactions and events.

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Fundamental Accounting Principals, 18th Edition
Wild, Larson, Chiappetta, McGraw-Hill Irwin

Problem 10-3A: Computing and revising depreciation; revenue and capital expenditures.

Champion Contractors completed the following transactions and events involving the purchase and operation of equipment in its business.

2007

Jan. 1 Paid $287,600 cash plus $11,500 in sales tax and $1,500 in transportation (FOB
shipping point) for a new loader. The loader is estimated to have a four-year life
and a $20,600 salvage value. Loader cost are recorded in the Equipment account.

The total cost is the total amount spent in getting the loader ready for use. The total cost is ...

Solution Summary

The solution explains how to record the journal entries for the given transactions

$2.19
See Also This Related BrainMass Solution

Decision process for eliminating a product at Working Computers Inc.

The full detail of the question has been attached.

1. Given the unit sales information in Exhibit 1, develop an annual revenue forecast for 2004 through 2009. Forecast sales first assuming that the revised Bernoulli will be introduced one year from today, and then create a forecast which is based on sales of the current model, assuming that Working declines to invest more capital in Bernoulli.

2. Use the cost information Jennifer has assembled to construct a forecast of cost of goods sold and operating expenses for 2004 through 2009. Assume first that the Bernoulli will be introduced, with its new cost structure, one year from now, and then calculate a cost forecast assuming that the $18 million is not provided for development of the new product.

3. Using the information developed for Questions 1 and 2, develop a discounted cash flow analysis for the Bernoulli division for 2004 through 2009. Working's board has asked for net present value, profitability and the internal rate of return when making decisions in the past. Complete your analysis assuming that the additional investment is contributed today. Be sure to recognise a terminal value for the division at the end of 2009.

4. Make a recommendation as to whether or not Working Computers should contribute the requested $18 million to the Bernoulli. Be sure to recognise/discuss all aspects of the decision, including the potential impact that the requested ongoing investment dollars could have on the plans of Stewart Workman.

5. Jennifer expects Stewart Workman to ask about selling the Bernoulli division. What price should Working ask for if it sells Bernoulli today, immediately after making the requested investment? What price could it expect to receive if it plans to leave Bernoulli alone?

6. In addition to the issues in Question 1 through 5, what other considerations might be appropriate when a firm is considering eliminating a product line or divesting a division?

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