During the first month of its current fiscal year, Green Co. Incurred repair costs of $21,000 on a machine that had 5 years of remaining depreciable life. The repair cost was inappropriately capitalized. Green Co. reported operating income of $160,000 for the current year. Required: a. Assuming that Green Co. took a full year's straight-line depreciation expense in the current year, calculate the operating income that should have been reported for the current year. Operating Income b. Assume that Green Co.'s total assets at the end of the prior year and at the end of the current year were $941,000 and $1,002,000, respectively. Calculate ROI (based on operating income) for the current year using the originally reported data and then using corrected data. (Round your answers to 1 decimal place. (e.g. 32.1)) ROI Original data Corrected data % Grove Co. acquired a production machine on January 1, 2019, at a cost of $505,000. The machine is expected to have a four-year useful life, with a salvage value of $90,000. The machine is capable of producing 60,000 units of product in its lifetime. Actual production was as follows: 13,200 units in 2019,19,200 units in 2020; 16,800 units in 2021: 10,800 units in 2022. Following is the comparative balance sheet presentation of the net book value of the production machine at December 31 for each year of the asset's life, using three alternative depreciation methods (items a-c): Required: Identify the depreciation method used for each of the following comparative balance sheet presentations (items a-c). If a declining- balance method is used, be sure to indicate the percentage (150% or 200%). (Hint: Read the balance sheet from right to left to determine how much has been depreciated each year. Remember that December 31, 2019, is the end of the first year) Depreciation Method 2019 Production Machine, Net of Accumulated Depreciation At December 31 2022 2021 2020 90,000 164,700 280,900 90,000 90,000 126,250 90,000 193,750 297,500 b. 413,700 252,500 401,250 C. Assume that a company chooses an accelerated method of calculating depreciation expense for financial statement reporting purposes for an asset with a five-year life. Required: State the effect (higher, lower, no effect) of accelerated depreciation relative to straight-line depreciation on: a. Depreciation expense in the first year, b. The asset's not book value after two years. c. Cash flows from operations (excluding income taxes). etch each of the terms with the correct definition. N Amortization Expense. Depletion expense. 3 Copyrights. Patents. Goodwill, Depreciation expense. The Modified Accelerated Cost Recovery System (MACRS) Match each of the options above to the items below. The process of spreading the cost of an intangible asset over its useful life. Match each of the options above to the items below. The process of spreading the cost of an intangible asset over its useful life. - The process of spreading the cost of a tangible asset over its useful life. - The process of spreading the cost of a natural resource over its useful life. A process for spreading the cost of a tangible asset over its useful life for income tax purposes
