4 Safari 9:19 pm Wed 9 Sep S52N Max - Topic 4-2020 Draw Layout 20 Home Insert Review View Palatino 10 1 .. CASE STUDYS -DEPRECIATION AND DERECOGNITION OF NON-CURRENT ASSETS Max has decided to go ahead with the purchase of the group of assets as it will allow him to diversify his production, but limit the amount he needs to borrow to achieve this The journal entry below represents Max's purchase of the assets. Inventory 100 Testing Unit 5.730 Electric Car 17.190 Warchouse and Land 72.50 Sunday Credito (To record the awon of illegro 107,500 Max has reviewed the other assets he currently owns and has compiled the following information as at 30 June this year prior to making this acquisition) 231 Ace Des ELi Heist Office Equip | Aat Di or leup Tools Ae Di Tools Vw 2.500 Depreciation for these assets is calculated by the straight-line method. The Ex-Lig Hoistis expected to have a useful life of 10 years with a scrap value of $300. The Tools are expected to be useful for 10 years with a scrap value of S250, and the office equipment is expected to last years and have no residual value. Max is happy to keep using this data for the foreseeable future. The Van will have a residual value of $2,000 and a useful life of years. Max has asked for your help on how to depreciate the assets he has recently acquired Required 1. Discuss which depreciation method would be appropriate for the new assets acquired given the following information The inventory is in good condition and Max believes there is no risk of 1. The Electric Car is expected to run for 360,000kms before needing replacing and should fetch a son value of 1.200 c. The Testing Unit is an older model. Max has checked with some associates and they believe it should function for at least 5 more years but in 4 years it will become technically obsolete. After 4 years it will only sell for S250 scrap d. The warehouse is in very good condition and should last at least 10 years at time it could be knocked down for a cost of $5,000 and the land could be sold for an estimated $90,000 4 Safari 9:20 pm Wed 9 Sep Max - Top 40 - 2020 Insert Draw Layout Home Review View Palatino 10 B Make sure you include arguments for the methods you have chosen in your answer. 4 Safari 9:20 pm Wed 9 Sep Max - Top 4-2020 Draw Layout Home Insert Review View Palatino 10 .. FATMAX CASE STUDY: TOPIC 4 DEPRECTION AND DISPOSAL 2. Following some further discussions with Max, it has been decided that the following depreciation methods will be employed Electric Car - Units of Use Method based on the information provided above. Usage is 26,000kms in the first year of use and 24,000kms in the following year b. Testing Unit Reducing lalance at a reor 49% Warehouse - Straight Line Bate based on the information provided above and assuming the fair value of the land accounted for 60% of the cost of the package. Show the General Journal entries to record the depreciation expense on all assets Max now has control of for the remainder of this year and all of next year 2. Max Armim Torque - General Journal PARTICULARS $ DATE PR DEBIT CREDIT 4 Safari 9:20 pm Wed 9 Sep Max - Top 4-2020 Draw Layout Home Insert Review View Palatino 10 1 .. FATMAX CASE STUDY: TOPIC 40 DEPRECTION AND DISPOSAL Unfortunately it has become obvious that in deciding to purchase the Standard Diesel Van Max did not adequately assess his goals or consider all of the consequences involved with purchase. While the van itself operates well, Max has realised there is a strong consumer desire for environmentally friendly products and a number of Max's clients are concermed about the pollution his van produces. It has become clear to Max now that he would have been better off purchasing an ook Max finds a suitable substitute van from another business who is willing to trade their Eco Van for Max's testing unit and $40.000 cash. The fair value of the testing unit is $1.500 and the fair value of the EcoVan is $50.000 Max is quite angry after being told that the fair value of his testing unit is caly S1,500 when the carrying amount is still recorded in his books at $3,264 and that he will now have to record a loss of more than 1000 Max thinks you have done a borible job of teaching him about depreciation Required 3. Explain to Max why the figures he has calculated are correct and remind him of the purpose of depreciation and the incorrect association he has made with the current market value II 4 Safari 9:20 pm Wed 9 Sep Max - Topic 4-2020 Draw Layout Home Insert Review View Palatino 10 B T A. FAI-MAX CASE STUDY: TOPIC DEPRECTION AND DISPOSAL w 27 Max has re-evaluated the usefulness of the rest of his assets and also provided you with the following information based on the calculations he had performed to the end of the last financial year. Max will continue to use the depreciation rates established in the last case study Bali Ho Ace. De-ELi Host 935 Office | Aas. Drin Tools 2.500 Ace Dela Tools 1.356 V 11.40 Accused Depreciation - Testing 5.710 Accumulated Deci Testing 2.578.50 SESSO Electric 17.190 Acculad Depreciatice - Electrice Warehouse 14,02 Accumulated Depreciation - Wachowe Required 4. Provide the General Joumal entries to dispose the assets as per the transactions listed below, using the net method of recording disposals. The nethod does not account for the Carrying Amount and Proceeds from sale separately, instead showing only the Gain loss a On October 15 Max exchanged his Testing Unit and cash and took control of his new Foo Van The new Van has a list price of $32,000, but Max needed some modifications made in order for him to weit in the same way as his old van Max was able to use the GPS Navigation Unit but had to arrange for new suspension and specially designed hydraulic lift and ramp. The cost of these additional items was $7,800 1. Having found a suitable replacement for his van, Max now has no further use free the old diesel van and takes it to a car yard who offered him a trade-in value of Max managed to arrange for atrade-in of $21.000 on the same day. 4 Safari 9:20 pm Wed 9 Sep Max - Topic 4-2020 Draw Layout Home Insert Review View Palatino 10 I UA.. FALMAX CASE STUDY TOPIC DEPRECTION AND DISPOSAL 4. Max Armim Torque - General Journal DATE PARTICULARS PR DEBIT CREDIT 4 Safari 9:20 pm Wed 9 Sep Max - Topic 4-2020 Draw Layout Home Insert Review View Palatino 10 A. FATMAX CASE STUDY: TOPIC DEPRECTION AND DISPOSAL Max is feeling better about the entries now and thanks you for taking care of them for him. He now wants to know that since his business is doing much better with the better assets and products for clients to buy from him he believes he has managed to build quite a solid reputation which has improved the net worth of his business and wants this to be reflected in Max Amim Torque's balance sheet and has asked you to work your magic to make it happen. Required 5. Explain to Max if this is possible and what the standards say about this. Discuss also what the standards say the correct treatment of goodwill is and contrast it to the previous standards Safari 9:19 pm Wed 9 Sep S52N Max - Topic 4-2020 Draw Layout Home Insert Review View Palatino 10 I UA.. CASE STUDYS - DEPRECIATION AND DERECOGNITION OF NON-CURRENT ASSETS Max has decided to go ahead with the purchase of the group of assets as it will allow him to diversify his production, but limit the amount he needs to borrow to achieve this The journal entry below represents Max's purchase of the assets. 1 July Inventory 12 000 Testing Unit 5.730 Electric Car 17.190 Warchouse and Land 72.50 Sunday Credito 107.000 To record the awon of ilusgroep Max has reviewed the other assets he currently owns and has compiled the following information as at 30 June this year prior to making this acquisition) 0 231 Ace Dela-ELi Hit Office Equip | Aar. Duri or leup Tools Ace Di Tools Vw 2.500 Depreciation for these assets is calculated by the straight-line method. The Ex-Li Hoistis expected to have a useful life of 10 years with a scrap value of $300. The Tools are expected to be useful for 10 years with a scrap value of $250, and the office equipment is expected to last 3 years and have no residual value. Max is happy to keep using this data for the foreseeable future. The Van will have a residual value of $2,000 and a useful life of years. Max has asked for your help on how to depreciate the sets he has recently acquired Required 1. Discuss which depreciation method would be appropriate for the new assets acquired given the following information The inventory is in good condition and Max believes there is no risk of The Electric Car is expected to run for 360,000kms before needing replacing and should fetch a son value of 1.000 c. The Testing Unit is an older model. Max has checked with some associates and they believe it should function for at least 5 more years but in 4 years it will become technically obsolete. After years it will only sell for S250 scrap d. The warehouse is in very good condition and should last at least 10 years at time it could be knocked down for a cost of $5,000 and the land could be sold for an estimated $90,000 4 Safari 9:19 pm Wed 9 Sep S52N Max - Topic 4-2020 Draw Layout 20 Home Insert Review View Palatino 10 1 .. CASE STUDYS -DEPRECIATION AND DERECOGNITION OF NON-CURRENT ASSETS Max has decided to go ahead with the purchase of the group of assets as it will allow him to diversify his production, but limit the amount he needs to borrow to achieve this The journal entry below represents Max's purchase of the assets. Inventory 100 Testing Unit 5.730 Electric Car 17.190 Warchouse and Land 72.50 Sunday Credito (To record the awon of illegro 107,500 Max has reviewed the other assets he currently owns and has compiled the following information as at 30 June this year prior to making this acquisition) 231 Ace Des ELi Heist Office Equip | Aat Di or leup Tools Ae Di Tools Vw 2.500 Depreciation for these assets is calculated by the straight-line method. The Ex-Lig Hoistis expected to have a useful life of 10 years with a scrap value of $300. The Tools are expected to be useful for 10 years with a scrap value of S250, and the office equipment is expected to last years and have no residual value. Max is happy to keep using this data for the foreseeable future. The Van will have a residual value of $2,000 and a useful life of years. Max has asked for your help on how to depreciate the assets he has recently acquired Required 1. Discuss which depreciation method would be appropriate for the new assets acquired given the following information The inventory is in good condition and Max believes there is no risk of 1. The Electric Car is expected to run for 360,000kms before needing replacing and should fetch a son value of 1.200 c. The Testing Unit is an older model. Max has checked with some associates and they believe it should function for at least 5 more years but in 4 years it will become technically obsolete. After 4 years it will only sell for S250 scrap d. The warehouse is in very good condition and should last at least 10 years at time it could be knocked down for a cost of $5,000 and the land could be sold for an estimated $90,000 4 Safari 9:20 pm Wed 9 Sep Max - Top 40 - 2020 Insert Draw Layout Home Review View Palatino 10 B Make sure you include arguments for the methods you have chosen in your answer. 4 Safari 9:20 pm Wed 9 Sep Max - Top 4-2020 Draw Layout Home Insert Review View Palatino 10 .. FATMAX CASE STUDY: TOPIC 4 DEPRECTION AND DISPOSAL 2. Following some further discussions with Max, it has been decided that the following depreciation methods will be employed Electric Car - Units of Use Method based on the information provided above. Usage is 26,000kms in the first year of use and 24,000kms in the following year b. Testing Unit Reducing lalance at a reor 49% Warehouse - Straight Line Bate based on the information provided above and assuming the fair value of the land accounted for 60% of the cost of the package. Show the General Journal entries to record the depreciation expense on all assets Max now has control of for the remainder of this year and all of next year 2. Max Armim Torque - General Journal PARTICULARS $ DATE PR DEBIT CREDIT 4 Safari 9:20 pm Wed 9 Sep Max - Top 4-2020 Draw Layout Home Insert Review View Palatino 10 1 .. FATMAX CASE STUDY: TOPIC 40 DEPRECTION AND DISPOSAL Unfortunately it has become obvious that in deciding to purchase the Standard Diesel Van Max did not adequately assess his goals or consider all of the consequences involved with purchase. While the van itself operates well, Max has realised there is a strong consumer desire for environmentally friendly products and a number of Max's clients are concermed about the pollution his van produces. It has become clear to Max now that he would have been better off purchasing an ook Max finds a suitable substitute van from another business who is willing to trade their Eco Van for Max's testing unit and $40.000 cash. The fair value of the testing unit is $1.500 and the fair value of the EcoVan is $50.000 Max is quite angry after being told that the fair value of his testing unit is caly S1,500 when the carrying amount is still recorded in his books at $3,264 and that he will now have to record a loss of more than 1000 Max thinks you have done a borible job of teaching him about depreciation Required 3. Explain to Max why the figures he has calculated are correct and remind him of the purpose of depreciation and the incorrect association he has made with the current market value II 4 Safari 9:20 pm Wed 9 Sep Max - Topic 4-2020 Draw Layout Home Insert Review View Palatino 10 B T A. FAI-MAX CASE STUDY: TOPIC DEPRECTION AND DISPOSAL w 27 Max has re-evaluated the usefulness of the rest of his assets and also provided you with the following information based on the calculations he had performed to the end of the last financial year. Max will continue to use the depreciation rates established in the last case study Bali Ho Ace. De-ELi Host 935 Office | Aas. Drin Tools 2.500 Ace Dela Tools 1.356 V 11.40 Accused Depreciation - Testing 5.710 Accumulated Deci Testing 2.578.50 SESSO Electric 17.190 Acculad Depreciatice - Electrice Warehouse 14,02 Accumulated Depreciation - Wachowe Required 4. Provide the General Joumal entries to dispose the assets as per the transactions listed below, using the net method of recording disposals. The nethod does not account for the Carrying Amount and Proceeds from sale separately, instead showing only the Gain loss a On October 15 Max exchanged his Testing Unit and cash and took control of his new Foo Van The new Van has a list price of $32,000, but Max needed some modifications made in order for him to weit in the same way as his old van Max was able to use the GPS Navigation Unit but had to arrange for new suspension and specially designed hydraulic lift and ramp. The cost of these additional items was $7,800 1. Having found a suitable replacement for his van, Max now has no further use free the old diesel van and takes it to a car yard who offered him a trade-in value of Max managed to arrange for atrade-in of $21.000 on the same day. 4 Safari 9:20 pm Wed 9 Sep Max - Topic 4-2020 Draw Layout Home Insert Review View Palatino 10 I UA.. FALMAX CASE STUDY TOPIC DEPRECTION AND DISPOSAL 4. Max Armim Torque - General Journal DATE PARTICULARS PR DEBIT CREDIT 4 Safari 9:20 pm Wed 9 Sep Max - Topic 4-2020 Draw Layout Home Insert Review View Palatino 10 A. FATMAX CASE STUDY: TOPIC DEPRECTION AND DISPOSAL Max is feeling better about the entries now and thanks you for taking care of them for him. He now wants to know that since his business is doing much better with the better assets and products for clients to buy from him he believes he has managed to build quite a solid reputation which has improved the net worth of his business and wants this to be reflected in Max Amim Torque's balance sheet and has asked you to work your magic to make it happen. Required 5. Explain to Max if this is possible and what the standards say about this. Discuss also what the standards say the correct treatment of goodwill is and contrast it to the previous standards Safari 9:19 pm Wed 9 Sep S52N Max - Topic 4-2020 Draw Layout Home Insert Review View Palatino 10 I UA.. CASE STUDYS - DEPRECIATION AND DERECOGNITION OF NON-CURRENT ASSETS Max has decided to go ahead with the purchase of the group of assets as it will allow him to diversify his production, but limit the amount he needs to borrow to achieve this The journal entry below represents Max's purchase of the assets. 1 July Inventory 12 000 Testing Unit 5.730 Electric Car 17.190 Warchouse and Land 72.50 Sunday Credito 107.000 To record the awon of ilusgroep Max has reviewed the other assets he currently owns and has compiled the following information as at 30 June this year prior to making this acquisition) 0 231 Ace Dela-ELi Hit Office Equip | Aar. Duri or leup Tools Ace Di Tools Vw 2.500 Depreciation for these assets is calculated by the straight-line method. The Ex-Li Hoistis expected to have a useful life of 10 years with a scrap value of $300. The Tools are expected to be useful for 10 years with a scrap value of $250, and the office equipment is expected to last 3 years and have no residual value. Max is happy to keep using this data for the foreseeable future. The Van will have a residual value of $2,000 and a useful life of years. Max has asked for your help on how to depreciate the sets he has recently acquired Required 1. Discuss which depreciation method would be appropriate for the new assets acquired given the following information The inventory is in good condition and Max believes there is no risk of The Electric Car is expected to run for 360,000kms before needing replacing and should fetch a son value of 1.000 c. The Testing Unit is an older model. Max has checked with some associates and they believe it should function for at least 5 more years but in 4 years it will become technically obsolete. After years it will only sell for S250 scrap d. The warehouse is in very good condition and should last at least 10 years at time it could be knocked down for a cost of $5,000 and the land could be sold for an estimated $90,000