Question

I have noticed that in many exercises when there is a difference between book value and...

I have noticed that in many exercises when there is a difference between book value and fair market value , we calculate the percentage of discount at first in order to calculate the depreciation expenses

For example, let's think about a company which buys an asset from other company

The book value of machine is 30.000 USD

The fair value (after financial expert statement) is 35.000USD

How can we calculate the depreciation expenses for 10 years (we assume salvage value is zero (0)] by using the percentage of discount and why does it happen?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Lets us understand fair value

Fair value is the price at which asset is exchange between knowledgeable parties at arm's lenght transcation.

book value generally means cost at which asset is acuquired.

so for depreciation book value is always used to calculate depreciation.

so,

book value of machine is 30.000 USD and machine life is 10 years

here i m using SLM to calculate depreciation

as salvage value is zero.

depreciation amount = book value - salvage value life of asset

so , 30.000 USD - 0 10 years = 3.000 USD.

now book value reduced to 27.000 USD as we have subtraact the depricaion amout.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Calculating project cash flows: Why do we use forecasted incremental after-tax free cash flows instead...
1. Calculating project cash flows: Why do we use forecasted incremental after-tax free cash flows instead of forecasted accounting earnings in estimating the NPV of a project? 2. The FCF calculation: How do we calculate incremental after-tax free cash flows from forecasted earnings of a project? What are the common adjustment items? 3. The FCF calculation: How do we adjust for depreciation when we calculate incremental after-tax free cash flow from EBITDA? What is the intuition for the adjustment? 4....
On January 1, 2017, Mona, Inc., acquired 90 percent of Lisa Company’s common stock as well...
On January 1, 2017, Mona, Inc., acquired 90 percent of Lisa Company’s common stock as well as 70 percent of its preferred shares. Mona paid $66,000 in cash for the preferred stock, with a call value of 110 percent of the $50 per share par value. The remaining 30 percent of the preferred shares traded at a $35,000 fair value. Mona paid $558,000 for the common stock. At the acquisition date, the noncontrolling interest in the common stock had a...
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large,...
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $4.7 million in anticipation of using it as a toxic dump site for waste chemicals, but it...
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large,...
Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago for $3.9 million in anticipation of using it as a toxic dump site for waste chemicals, but it...
1.) Sam Strother and Shawna Tibbs are vice presidents of Mutual of Seattle Insurance Company and...
1.) Sam Strother and Shawna Tibbs are vice presidents of Mutual of Seattle Insurance Company and co-directors of the company’s pension fund management division. An important new client, the North-Western Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them by answering the following questions. a. What are the key features of a bond? b....
Assumptions: At the beginning of 2009, CanGo purchased the online gaming company. This purchase was for...
Assumptions: At the beginning of 2009, CanGo purchased the online gaming company. This purchase was for cash, paid for through the proceeds of the IPO and results in goodwill. 90% of the online book sales comes from JIT, the other 10% through the inventory which CanGo possesses. 100% of the CD/DVD/MP3 come through CanGo inventory. The result is that 80% of ALL sales is JIT and 20% is inventory. Student Name: Instructions: Go to the CanGo intranet found in the...
Please read the article and answear about questions. Determining the Value of the Business After you...
Please read the article and answear about questions. Determining the Value of the Business After you have completed a thorough and exacting investigation, you need to analyze all the infor- mation you have gathered. This is the time to consult with your business, financial, and legal advis- ers to arrive at an estimate of the value of the business. Outside advisers are impartial and are more likely to see the bad things about the business than are you. You should...
Late in 2018, Felix Machine Company (FMC) management was considering expansion of the company’s international business...
Late in 2018, Felix Machine Company (FMC) management was considering expansion of the company’s international business activities. FMC is a South Carolina–based manufacturer of compound machines for use in industrial equipment. FMC’s worldwide market was supplied from subsidiaries in France, Brazil, and Taiwan, as well as from the United States. The company was particularly successful in Asia, mainly due to the high quality of its products, its technical expertise, and excellent after-sale service. This success led corporate management to consider...
What role could the governance of ethics have played if it had been in existence in...
What role could the governance of ethics have played if it had been in existence in the organization? Assess the leadership of Enron from an ethical perspective. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among the top Fortune 500 companies, collapsed in 2001 under a mountain of debt...
Discuss how the respective organizations’ relations with stakeholders could have potentially been affected by the events...
Discuss how the respective organizations’ relations with stakeholders could have potentially been affected by the events that took place at Enron and how the situation could have been dealt with differently to prevent further damage? THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among the top Fortune 500 companies,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT