Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
5th Edition
ISBN: 9780134078939
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 9.1CTFC
1.
To determine
Fraud Case
Case Summary: J is the manager of a fleet of utility trucks for a county government and doing the job for 30 years. He knows that the residual value of the truckis set low when they are fully depreciated, and being replaced by new trucks. He knows people in the construction business who buys these trucks at a bargain price against some kickback for him. Recently a new commissioner with a business degree is elected and he is determined to cut down on expenses.
To explain: If a business recognizes gain or loss when it sells a fully depreciated asset for its residual value.
2.
To determine
To discuss: The method the business use to determine the residual values for their various assets. To ascertain if any ‘hard and fast’ rule exists for residual values.
3.
To determine
To Identify: The methods to be used to prevent the kind of fraud show cased in this situation.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
ou have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.1 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.3 million on an after-tax basis. In four years, the land could be sold for $2.4 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600, 4,300, 5,200, and 3,900 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a…
Kendall purchased an office building in Atlanta's growing west end. The building is
70 years old and has been empty for over ten years. The offices are in disrepair.
First thing Kendall must do is to hire a painter to paint the interior of the office
building. Kendall reaches out to Cameron, and they have the following conversation:
Kendall: I will pay you $25,000 to paint the interior of my office building.
Cameron: I have seen your office building, it will cost you $75,000 for me to paint
that building's interior.
Kendall: Ah, yes. Well, let's split it down the middle. I will pay you $50,000.00.
Cameron: OK. I agree to do it for $50,000, but you must also supply the paint,
brushes, ladders, tarps, cleaner, and other equipment I need.
Does a contract exist between Kendall and Cameron?? Explain fully using IRAC.
Susan Whitehead serves on the city planning commission. The city is planning to build a new subway system, and Susan's brother-in-law, Jerry, who owns the Custom Transportation Co., has submitted the lowest bid for the system. Susan knows that Jerry could complete the job for the estimated amount, but she also knows that once Jerry completes this job, he will probably sell his company and quit working. Susan is concerned that Custom subsequent management might not be as easy to work with if revisions need to be made on the subway system after its completion. She is torn as to whether she should tell the city about the potential changes in Custom Transportation's management. If the city knew about the instability of Custom, it might prefer to give the contract to one of Jerry's competitors, whose bid was only slightly higher than Jerry's. Does Susan have an ethical obligation to disclose the information about Jerry to the city planning commission? Discuss fully.
Chapter 9 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Ch. 9 - Prob. 1QCCh. 9 - Prob. 2QCCh. 9 - Which method almost always produces the most...Ch. 9 - A Celty Airline jet costs 28,000,000 and is...Ch. 9 - A copy machine costs 45,000 when new and has...Ch. 9 - Suppose Print and Photo Center in the preceding...Ch. 9 - Prob. 7QCCh. 9 - Prob. 8QCCh. 9 - Liberty Corporation reported beginning and ending...Ch. 9 - A truck costs 50,000 when new and has accumulated...
Ch. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Prob. 3RQCh. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - What is the difference between a capital...Ch. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - How does a business decide which depreciation...Ch. 9 - Prob. 10RQCh. 9 - Prob. 11RQCh. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - How is gain o r loss determined when disposing of...Ch. 9 - Prob. 15RQCh. 9 - Prob. 16RQCh. 9 - Prob. 17RQCh. 9 - Prob. 18RQCh. 9 - Prob. 19RQCh. 9 - What does it mean if an exchange of plant assets...Ch. 9 - Determining the cost of an asset Alton Clothing...Ch. 9 - Prob. 9.2SECh. 9 - Prob. 9.3SECh. 9 - Computing second-year depreciation and accumulated...Ch. 9 - Calculating partial-year depreciation On September...Ch. 9 - Prob. 9.6SECh. 9 - Prob. 9.7SECh. 9 - Discarding an asset On May 31, 2016, Choice...Ch. 9 - Selling an asset at gain or loss Mill Creek Golf...Ch. 9 - Selling an asset at gain or loss Pelman Company...Ch. 9 - Accounting for depletion of natural resources...Ch. 9 - Accounting for an intangible asset On March 1,...Ch. 9 - Prob. 9.13SECh. 9 - Prob. 9.14SECh. 9 - Prob. 9.15SECh. 9 - Prob. 9.16SECh. 9 - Prob. 9.17ECh. 9 - Making a lump-sum purchase of assets Dearwood...Ch. 9 - Prob. 9.19ECh. 9 - Computing depreciation-three methods Crackling...Ch. 9 - Changing an asset's useful life and residual value...Ch. 9 - Recording partial-year depreciation and sale of an...Ch. 9 - Prob. 9.23ECh. 9 - Prob. 9.24ECh. 9 - Prob. 9.25ECh. 9 - Prob. 9.26ECh. 9 - Computing asset turnover ratio Snap Dragon Photo...Ch. 9 - Prob. 9.28ECh. 9 - Measuring asset cost, units-of-production...Ch. 9 - Prob. 9.30APCh. 9 - Determining asset cost, recording first-year...Ch. 9 - Recording lump-sum asset purchases, depreciation,...Ch. 9 - Prob. 9.33APCh. 9 - Prob. 9.34APCh. 9 - Journalizing partial-year depreciation and asset...Ch. 9 - Prob. 9.36BPCh. 9 - Determining asset cost, recording rust-year...Ch. 9 - Recording lump-sum asset purchases, depreciation,...Ch. 9 - Prob. 9.39BPCh. 9 - Prob. 9.40BPCh. 9 - Journalizing partial-year depreciation and asset...Ch. 9 - Prob. 9.42CPCh. 9 - Western Bank Trust purchased land and a building...Ch. 9 - Prob. 9.1CTFCCh. 9 - Prob. 9.1CTFSCCh. 9 - In 150 words or fewer, explain the different...
Knowledge Booster
Similar questions
- GreenGrow Limited is a local landscaping company that does household and commercial landscaping. Primarily, they help business select plants and manage the plants. They also have regular maintenance contracts such as watering, weeding, and mowing. In the winter, they have some contracts for managing the indoor plants of shopping malls, and do snow clearing to help boost that low income season. Joey, the majority shareholder of GreenGrow is ecstatic. He has managed to come in as the low bidder for a new type of contract. He bid on the construction of a track for the track and field area of a local college. A piece of land on the north end of the college is being cleared and GreenGrow will be leveling the land and placing a bed of crushed stone for the track. Joey has just the right person to be in charge. Jack has previous experience working as an assistant on a road crew and knows how to use the surveying equipment needed to keep the track level. This is a big contract, representing…arrow_forwardMr. Charles owns a private garbage dump. He has been asked that to avoid leaks that contaminate the groundwater, he must install a plastic protector. The landfill area is 7 km2 and the cost of handling the vapors is $ 1,000 per km2 and is paid for all land use. The installation cost of the protector is known to be $ 2,000,000. To recoup the investment in 5 years, Mr. Charles charged $ 50 for the delivery truck loads, $ 100 for the dump truck loads, and $ 200 for the compactor truck loads. It is also known that the monthly distribution has been estimated at 1,000 delivery truck loads, 200 dump truck loads and 500 compactor truck loads. a) What internal rate of return did Mr. Charles obtain on his investment? to. Effective monthly and Effective annually b) If the minimum attractive rate of return is 8% annual compound monthly cash for Mr. Charles's businesses, what can you recommend in this regard, support your answers?arrow_forwardYou have been hired as a consultant for Pristine Urban-Tech Zither, Incorporated (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $740,000 in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $950,000 on an aftertax basis. In four years, the land could be sold for $1,225,000 after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $130,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 7,120, 7,920, 9,215, and 6,110 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium…arrow_forward
- Hart Corporation is a chemical company that produces cleaning fluids of different types. It is the main employer in a small town. Stan Hart has been the company president for 15 years and is paid a salary plus a 10% bonus based on pretax income; he is also the major shareholder. After treatment to remove pollutants, Hart has been draining the waste water from its production process into a nearby river for many years. Over the past year (2019), there have been several “fish kills” in the river. At the end of 2019, the Environmental Protection Agency (EPA) filed a $1 million lawsuit against Hart for violation of pollution control laws. You are an accountant for the firm that is auditing Hart’s 2019 financial statements. Preliminary calculations show that Hart earned a pretax income of $600,000 for 2019, before considering the effects of the lawsuit. In a discussion with Stan Hart and Bob Brandt, the company’s attorney, you raise the issue of whether or not to report the lawsuit in the…arrow_forwardYou have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $1,190,000 in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $1,400,000 on an aftertax basis. In four years, the land could be sold for $1,675,000 after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $220,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 7,300, 8,280, 9,485, and 6,290 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a…arrow_forwardCharles wants to renovate the bathroom and kitchen in his home, and he hires Veronica to do this work. They enter into a contract after agreeing to a cost of $40,000. However, once Veronica starts work, she realizes that it will cost $15,000 extra to complete the work that she promised. To show good faith to Charles, Veronica tells him that she will split the added cost with Charles and asks Charles for an additional $7,500. Charles refuses to pay the additional $7,500, and Veronica threatens to stop work on the renovation. After fearing that another contractor will probably charge much more, Charles calls Veronica and tells her he’ll pay the additional $7,500. After the renovations are completed, Charles refuses to pay the additional $7,500, despite agreeing to it. Veronica sues Charles. Who wins? Please explain.arrow_forward
- You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ),manufacturers of fine zithers. The market for zithers is growing quickly. The company boughtsome land three years ago for $2.1 million in anticipation of using it as a toxic waste dump sitebut has recently hired another company to handle all toxic materials. Based on a recentappraisal, the company believes it could sell the land for $2.3 million on an after-tax basis. Infour years, the land could be sold for $2.4 million after taxes. The company also hired amarketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketingreport is as follows:The zither industry will have a rapid expansion in the next four years. With the brand namerecognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600,4,300, 5,200, and 3,900 units each year for the next four years, respectively. Again,capitalizing on the name recognition of PUTZ, we feel that a premium price…arrow_forwardRaul Martinas, a professor of languages at Eastern University, owns a small office building adjacent to the university campus. He acquired the property 10 years ago at a total cost of $559,000—that is, $52,000 for the land and $507,000 for the building. He has just received an offer from a realty company that wants to purchase the property; however, the property has been a good source of income over the years, and so Martinas is unsure whether he should keep it or sell it. His alternatives are as follows: a. Keep the property. Martinas’s accountant has kept careful records of the income realized from the property over the past 10 years. These records indicate the following annual revenues and expenses: Martinas makes a $12,675 mortgage payment each year on the property. The mortgage will be paid off in eight more years. He has been depreciating the building by the straight-line method, assuming a salvage value of $76,050 for the building, which he still thinks is an appropriate figure.…arrow_forwardYou have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.1 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.3 million on an after-tax basis. In four years, the land could be sold for $2.4 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600, 4,300, 5,200, and 3,900 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a…arrow_forward
- Raul Martinas, a professor of languages at Eastern University, owns a small office building adjacent to the university campus. He acquired the property 10 years ago at a total cost of $608,500-that is, $78,500 for the land and $530,000 for the building. He has just received an offer from a realty company that wants to purchase the property: however, the property has been a good source of income over the years, and so Martinas is unsure whether he should keep it or sell it. His alternatives are as follows: a Keep the property. Martinas's accountant has kept careful records of the income realized from the property over the past 10 years. These records indicate the following annual revenues and expenses: Martinas makes a $13,250 mortgage payment each year on the property The mortgage will be paid off in eight more years. He has been depredating the building by the straight-line method, assuming a salvage value of $79,500 for the building, which he still thinks is an appropriate figure. He…arrow_forwardYou have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.1 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.3 million on an after-tax basis. In four years, the land could be sold for $2.4 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600, 4,300, 5,200, and 3,900 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a…arrow_forwardYou have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.1 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.3 million on an after-tax basis. In four years, the land could be sold for $2.4 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600, 4,300, 5,200, and 3,900 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
