Palfinger’s AG – Property, Plant, and Equipment
a.) Palfinger’s property would include the property that they have to store the forklifts and other large inventory that they have on. The equipment would include all equipment that is necessary to make the inventory that they sell such as the cranes.
b.) This number represents the total of the plant, property, and equipment that Palfinger has. This number should be recorded as the historical cost that the plant, property and equipment was purchased at. This total number also has the total sum of amortized depreciation subtracted out to get the net amount of PP&E that is put on the balance sheet
c.) In the notes to the financial statements, Palfinger reports the plant, property and
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Net book value at end of year 1 is $8,793. Less what you received on the sale $7,500. Gives you a disposal loss of $1,293 using the straight-line method of depreciation. You then add the disposal loss from the previous years depreciation $1,880, which results in a total income statement impact of $3,173. ii. Using double- declining method, the first year ending balance of $6,404 is subtracted form the proceeds of the sale netting in a gain of $1,096 on the disposal. Once this is subtracted form the previous years depreciation $4,269, you get a total income statement impact of $3,173. iii. The total income statement impact is exactly the same. The computations turn out to be identical because it is essentially a backwards way of computing the initial cost of the asset of $10,673, minus the proceeds from the sale $7,500, which both gives you $3,173. The difference between the two is perception. One reports a gain on disposals, while the other reports a loss.
k.)
| | Palfinger |Palfinger |Caterpillar |Caterpillar |
| |2007 |2006
(2) Accumulated Depreciation- This account accumulates the depreciation over the course of the 12 months. As mentioned above, the appraisal value of PP&E is referred to as “PP&E, net”, which is the original value of $200,000 minus the accumulated depreciation for each month.
5. What was the effect on earnings per share of the change in depreciation method for 'hit" tapes (assume that hit tapes made up 25% of new tape purchases, and that the average hit tape was owned for half the year)?
In response to you requested investigation regarding the property, equipment and intangible asset accounts, we have completed adjustments to the necessary accounts. During the year new office equipment was purchased at a cost of $2,697.50. We will calculate the difference between the accumulated Depreciation of office equipment balance and the office equipment account. We will then include the new office equipment to the balance, and then multiply the new balance by 20 percent using the declining-balance basis:
Plant Goodwill Excluding Goodwill Net temporary differences Deferred tax liability 30% Beginning DTL balance Change in DTL (adjustment)
| Income Summary 280,000 Retained Earnings 280,000 Ending balance $300,000 Beginning balance 100,000 Difference 200,000 Cash dividends $40,000 Stock dividends 40,000 80,000 $280,000
5. Machinery was acquired at the beginning of the year. Depreciation recorded during the life of the machinery could result in (Page 1002)
The impairment loss is the excess of the asset group’s carrying value over the asset group’s fair value. ASC 820 states that fair value is “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.” The fair value of the asset group consists of the cruise ship, which has a fair value of $3 million, and the net working capital of $.1 million. The difference between the asset group’s fair value of $3.1 million and the carrying value of $4.7 million is an impairment loss $1.6 million, which should be recorded at the end of the current period, December 31, 2010.
Before abandonment the asset should be depreciated so at the time of disposal the carrying value equals the salvage value, but not less than zero. Assets that are distributed to owners or exchanged for a similar productive asset must recognize an impairment loss if the carrying amount exceeds fair value at the time of disposal. Assets that are going to be disposed of by sale must be classified as such and the gain or loss it recognizes must be disclosed on the income statement or in the notes. For assets disposed of by sale, the amount of cash received is compared the asset's book value, which is calculated by subtracting accumulated depreciation from the cost of the asset. A gain is recorded if the proceeds of the sale are greater than book value. A loss is recorded if the proceeds of the sale are less than the book value (FASB, 2014).
i. Consider the “Cumulative effect of change in accounting principle” reported on the income statement. Explain in your own words what item represents.
However, the tax basis of other amortizable, which was acquired in the same transaction, would be adjusted; that means the bases of the other intangible must be increased from the basis of the disposed intangible amount. Although, a taxpayer shall not recognize an immediate loss of the entire amount of the worthless intangible, the impairment of the intangible would be recognized over its remaining amortizable lives by increasing the bases of the other associated amortizable intangible. Continuing with the previous example, assuming that on December 31, 2007, Sara deemed goodwill to have a zero value. Consequently, Sara should increase the basis of going concern value by $24000, resulting in an adjusted basis of $60,000. Thus, the worthless goodwill amount continues to be amortized without any change to either the amount of amortization or the period of amortization. The only change that the amortization would be under the guise of another related intangible. On the other hand, if the worthless intangible were the only amortizable section 197 intangible acquired in the transaction, it could be written off, since there would be no basis to adjust of another existent amortizable section 197 intangible from that same purchase
This income statement summarizes the company’s performance during 2007. It reflects how much money the company brought in as revenues, how much spent on expenses, and the difference between the two is the net income profit. All figures above are in terms of millions. Excel rounded the depreciation value which was 1.5 to 2 and net income of 1.5 to 2 as well which gave total expense of 11 which is actually 10.5 million. I will attempt to explain the major components of this Income
The deductible temporary differences between the carrying value and the tax bases of depreciation/amortization is higher in FY2014 due to the higher asset balance as a result of the deferred stripping asset and increased ore mined which increased the expense for the year.
Under GAAP when a company disposes of a long-term asset at a cost different from the book value of the asset the difference will require an adjustment to net income on the cash flow statement. The difference between the disposal price and book value is considered either a gain or loss. For example, if a vehicle has a cost of $20,000 less accumulated depreciation of $17,000 the book value will be the difference equating to $3,000. If the vehicle is disposed of for $3,500 the difference between the book value and disposal amount equates to $500. This $500 is recognized as a gain on the sale of the asset and increases net income. Using the same example if the asset sold for $2,000 a loss of
All property, plant and equipment are stated at cost and depreciated over their useful lives. All depreciation expense incurred is derived using the straight line method. We do not depreciate our land. We estimate our useful life
Now the basis for all future transactions relating to this building would also be at its cost, i.e. $12 million. For example: The depreciation would be charged on $12 million and not on $15 million. Similarly when the asset is sold in future, the profit or loss on sale would be based on the cost price actually paid for it. Since the original or