Brinkley Leasing purchases farm machinery and leases it to farms. At the beginning of 2011 the company
Question:
Brinkley Leasing purchases farm machinery and leases it to farms. At the beginning of 2011 the company paid $ 1,000,000 for a fleet of tractors, and estimated their useful lives at five years. Brinkley immediately leased the vehicles for an annual charge of $250,000. Assume that all lease payments were made, the vehicles were disposed of after five years, and at the end of each year the following fair market values for the fleet were estimated.
December 31, 2011 ......790,000
December 31, 2012 ..... 622,000
December 31, 2013 ..... 432,000
December 31, 2014 ..... 227,000
December 31, 2015 ......... 0
(a) Compute the net income and balance sheet value associated with the fleet for each year using the matching concept and assuming that Brinkley uses straight-line depreciation
(b) Compute the net income and balance sheet value associated with the fleet for each year using the matching concept, assuming that Brinkley uses bauble-declining-balance depreciation.
(c) Compute net income and balance sheet value associated with the fleet for each year using the fair market value concept.
(d) Discuss the differences.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a Net Income Balance Sheet Value 2011 250000 200000 50000 800000 2012 250000 200000 50000 600000 201...View the full answer
