The purpose of this assignment is to analyze long-term assets in the financial statements, and to consider financial implications associated with long-term assets.
Complete Problem 10.5 from the textbook.
Use Microsoft Excel to show the calculations of depreciation prior to and after the recommended changes. In addition, in a Microsoft Word document, write a memo from Patty Chu to Patty’s boss comparing the results of the old and new depreciation expense amounts. Within the memo, discuss the impact to the income statement and balance sheet if these changes are approved. Finally, provide a recommendation on whether the changes should be made; use your calculations to support your position.
While APA style is not required for the body of this assignment, solid academic writing is expected, and documentation of sources should be presented using APA formatting guidelines, which can be found in the APA Style Guide, located in the Student Success Center.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
At the end of each year, Patty Chu, the chief accountant at Rex Lin Enterprises, a Singapore‐based trading company, reviews long‐term assets at the end of each year to determine whether changes are called for in how these assets are depreciated. In December 2017, her attention focused on two assets in particular:Date acquiredCostAccumulated depreciation end of 2017Useful lifeResidual valueWarehouse1/1/13$200,000$50,00025 years$10,000Building1/1/121,600,000228,00040 years100,000Patty is proposing the following changes:For the warehouse: a decrease in the useful life to 20 years and a decrease in residual value to $6,000.For the building: an increase in the useful life to 50 years and a decrease in the residual value to $55,000.Before agreeing to the changes, Patty’s bosses would like to know what the depreciation charges will be for each asset if the changes are adopted. All assets are depreciated using the straight‐line method.RequiredCalculate the revised annual depreciation expenses for each asset in 2018 and compare them to what the expenses would be if the changes were not made.
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