Problem 9C: Reporting Property, Plant, & Equipment

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Problem 9c: Reporting Property, Plant, & Equipment

1. Jaime Simes founded Simes Products on September 1. During its first year, the company had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the straight-line depreciation method, calculate the company’sgross profit for its first year ended August 31.

A) / $23,400
B) / $310,000
C) / $180,000
D) / $130,000
E) / $490,000

2. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the straight-line depreciation method, calculate the company’s depreciation expense for its first year ended August 31.

A) / $24,000
B) / $26,000
C) / $52,000
D) / $48,000
E) / $2,000

3. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the straight-line depreciation method, calculate the company’s total operating expenses for its first year ended August 31.

A) / $118,000
B) / $70,000
C) / $94,000
D) / $96,000
E) / $122,000

4. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the straight-line depreciation method, calculate the company’s income before taxes for its first year ended August 31.

A) / $12,000
B) / $36,000
C) / $8,000
D) / $224,000
E) / $60,000

5. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the straight-line depreciation method, calculate the company’s income taxes expense for its first year ended August 31.

A) / $108,500
B) / $2,800
C) / $23,400
D) / $5,200
E) / $12,600

6. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the straight-line depreciation method, calculate the company’s net income for its first year ended August 31.

A) / $310,000
B) / $23,400
C) / $5,200
D) / $48,600
E) / $10,800

7. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the straight-line depreciation method, calculate the dollar amount reported in the company’s general ledger equipment account at the end of its first year ended August 31.

A) / $182,000
B) / $106,000
C) / $154,000
D) / $130,000
E) / $78,000

8. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the straight-line depreciation method, calculate the dollar amount reported in the company’s general ledger accumulated depreciation, equipment account at the end of its first year ended August 31.

A) / $24,000
B) / $52,000
C) / $106,000
D) / $78,000
E) / $26,000

9. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the straight-line depreciation method, calculate the dollar amount reported in the company’s general ledger equipment account at the end of its second year ended August 31.

A) / $46,800
B) / $213,200
C) / $82,000
D) / $178,000
E) / $130,000

10. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the straight-line depreciation method, calculate the dollar amount reported in the company’s general ledger accumulated depreciation, equipment account at the end of its second year ended August 31.

A) / $104,000
B) / $24,000
C) / $48,000
D) / $52,000
E) / $83,200

11. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the double-declining-balance depreciation method, calculate the company’s gross profit for its first year ended August 31.

A) / $130,000
B) / $310,000
C) / $180,000
D) / $5,200
E) / $490,000

12. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the double-declining-balance depreciation method, calculate the company’s depreciation expense for its first year ended August 31.

A) / $24,000
B) / $26,000
C) / $52,000
D) / $48,000
E) / $2,000

13. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the double-declining-balance depreciation method, calculate the company’s total operating expenses for its first year ended August 31.

A) / $118,000
B) / $70,000
C) / $94,000
D) / $96,000
E) / $122,000

14. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the double-declining-balance depreciation method, calculate the company’s income before taxes for its first year ended August 31.

A) / $12,000
B) / $224,000
C) / $36,000
D) / $8,000
E) / $60,000

15. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the double-declining-balance depreciation method, calculate the company’s income taxes expense for its first year ended August 31.

A) / $108,500
B) / $2,800
C) / $23,400
D) / $5,200
E) / $12,600

16. During its first year, Simes Products had sales of $310,000, a cost of goods sold of $180,000, and operating expenses (not including depreciation) of $70,000. The company estimates its income taxes expense will be approximately 35% of income before taxes. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the double-declining-balance depreciation method, calculate the company’s net income for its first year ended August 31.

A) / $310,000
B) / $23,400
C) / $5,200
D) / $48,600
E) / $10,800

17. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the double-declining-balance depreciation method, calculate the dollar amount reported in the company’s general ledger equipment account at the end of its first year ended August 31.

A) / $182,000
B) / $106,000
C) / $154,000
D) / $78,000
E) / $130,000

18. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the double-declining-balance depreciation method, calculate the dollar amount reported in the company’s general ledger accumulated depreciation, equipment account at the end of its first year ended August 31.

A) / $24,000
B) / $52,000
C) / $106,000
D) / $78,000
E) / $26,000

19. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the double-declining-balance depreciation method, calculate the dollar amount reported in the company’s general ledger equipment account at the end of its second year ended August 31.

A) / $46,800
B) / $213,200
C) / $82,000
D) / $130,000
E) / $178,000

20. The company's equipment, all of which was purchased on September 1, cost $130,000, with an estimated residual or salvage value of $10,000, and a useful life of five years.

Assuming that Simes Products uses the double-declining-balance depreciation method, calculate the dollar amount reported in the company’s general ledger accumulated depreciation, equipment account at the end of its second year ended August 31.

A) / $83,200
B) / $24,000
C) / $48,000
D) / $52,000
E) / $104,000

21. Simes Products income statements for its tenth year ended August 31using the straight-line and double-declining-balance depreciation methods would appear as follows. How much more cash would Simes Products have available on August 31 if it uses the double-declining balance depreciation method instead of the straight-line method? To simplify your work in calculating your answer, consider the company’s tenth year only. Do not include any prior years in your analysis.

Simes Products
Income Statements
For the Year Ended August 31
Straight-
Line / Double-
Declining-

Balance

Sales / $400,000 / $400,000
Cost of Goods Sold / $232,000 / $232,000
Gross Profit / $168,000 / $168,000
Operating Expenses
Other than depreciation / $70,000 / $70,000
Depreciation Expense / $16,000 / $20,000
Total Operating Expenses / $86,000 / $90,000
Income Before Taxes / $82,000 / $78,000
Income Taxes Expense / $28,700 / $27,300
Net Income / $53,300 / $50,700
A) / - $2,600
B) / $2,600
C) / $0
D) / $4,000
E) / $1,400