...Amortization Objectives At the end of the discussion, students shall be able to: Describe the nature of amortization Find the size of each payment Determine the outstanding liability Describe amortization with irregular payment Prepare an amortization schedule Nature of Amortization Amortization Refers to the process of liquidating by installment the payments (at a regular interval) of a loan or debt, including the interest charges By the process of amortization, the principal and the interests are reduced by a series of installment payments made either at the beginning or at the end of the payment interval Implies that the amount regularly paid to discharge an obligation is of equal size Note: in finding the size of the periodic payment, one of the most important factors to consider is whether the loan is due now or later The concept of amortization is applicable if the loan or financial obligation due now Finding the Size of Each Payment The size of the periodic payment to settle a debt is highly dependent on the time the payment is made. For ordinary annuity ������ ������ = ������ 1 − 1 + ������ −������ For annuity due ������ ������ = ������ 1 − 1 + ������ −������ 1 + ������ For deferred annuity ������ 1 + ������ ������ ������ = ������ 1 − 1 + ������ −������ Example The cash price of a shopping equipment was P 120,000. Alex bought it with a down payment P 20,000 and the balance was payable at the end of every quarter for two years. If money...
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...problems that have not yet been resolved. • I was looking for a tone that was assertive, but professional and, above all, tactful. Negative wording such as “inappropriate,” “violates,” “inaccurate,” “fails to comply with,” etc. are to be avoided. Instead, it is better to indicate what AOL should do as opposed to what it should not be doing. This takes considerable thought and the ability to look at the message from Mr. Leonard’s point of view. The objective is to persuade him that your position about the accounting treatment is appropriate. Be complimentary where you can. AOL is using appropriate accounting in expensing software development costs up to technological feasibility and capitalizing thereafter. The issue is the amortization period, so make recommendations about alternatives and support them with economic reasons rather than stating “AOL must change.” I have posted on our Web site what I consider to be a good letter written by a student. Take a look through it to see how it is both assertive and tactful at the same time. • In the “content and guidance” areas, I was looking for some specific issues to be addressed that come directly from the case and which would meet the requirement that the discussion be based on “relevant GAAP guidance,” (see instructions.) I pointed you to SOP 93-7 and SFAS 86 for your discussion. Most of you did a good job relating...
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...BYP9-1 a) At December 31, 2009, total cost of property, plant and equipment was $427,597,000; book value was $206,876,000. b) Depreciation is calculated by use of the straight-line method over the estimated useful lives of 20 to 35 years of the assets. c) Depreciation and amortization was: 2009: $17,862,000, 2008: $17,036,000 2007: $15,859,000. d) Tootsie Roll’s purchases of property, plant, and equipment were: 2009: $20,831,000, 2008: $34,355,000. e) Tootsie Roll intangible assets are goodwill and trademarks with indefinite lives and they are not amortized, rather tested for impairment at least annually. The test is performed by comparing the carrying value of the asset with its estimated fair value, calculated using estimates including discounted projected future cash flows. BYP9-2 a) (in thousands) Tootsie Roll Hershey Foods 1. Return on assets ratio $53,475 $435,994 ($813,525+$838,247)/2=6.5% ($3,675,031+$3,634,719)/2 =11.9% 2. Profit margin $53,475 $435,994 $495,592=10.8% $5,298,668=8.2% 3. Asset turnover ratio $495,592 $5,298,668 ($813,525+$838,247)/2=.6 times ($3...
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...From part 1, we are to consider DDC Distribution and HC Holding to be one reporting unit. When performing step one of the Goodwill Impairment Testing we will consider two separate reporting units. The first reporting unit is the business component Medical-Surgical. Step one involves comparing the carrying value (including goodwill) with the fair value of the reporting unit. Carrying Value without Goodwill Carrying Value of Goodwill Total Carrying Value including Goodwill $118,800,000 3,200,000 $122,000,000 Fair Value Difference Carrying Value including Goodwill $125,000,000 FV > CV by $3,000,000 $122,000,000 When we compare this value with the Fair Value we see that the Fair Value is higher by $3,000,000. This means that Goodwill is not impaired and no further steps need to be taken. Now to compare the second reporting unit, DDC Distribution and HC Holding that are aggregated. We must first find the total carrying value, including Goodwill, of the two components. Value/Amount DDC Distribution HC Holdings Total Carrying Value of Net Assets (w/o Goodwill) $231,700,000 $72,250,000 $303,950,000 Carrying Value of Goodwill $10,500,000 $2,150,000 $12,650,000 Total Carrying Value including Goodwill $242,200,000 $74,400,000 $316,600,000 Now we follow step one and compare the carry value to fair value. Fair Value Difference Carrying Value including Goodwill $236,000,000 + 75,000,000 = $311,000,000 FV < CV by $5,600,000 $316,600,000 The second reporting...
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...Memo TO: Professor Brown FROM: Carissa Lambert DATE: April 6, 2015 SUBJECT: Case 11-9 Goodwill Impairment I think that Galaxy management should have performed an interim goodwill step 1 impairment test. Although it was not required, I think it could have been beneficial considering the declines of the past few quarters. They did review ASC 350 and determined that the test was not necessary. If they reviewed ASC 350 then we might assume that they performed a qualitative assessment of the factors listed in 350-20-35-3C (a) through (g). In the first three quarters of 2012, management explained the decline in earnings due to “continued slowing economy and reduced consumer spending.” Deterioration in economic conditions and a decline in earnings compared to expectations are both factors that can cause a drop in the fair value of the reporting units. Galaxy also experienced a sustained decline in their share prices for those three quarters. They had stock prices of $56.75 in 2011 that then dropped each quarter and was down to $25.25 by the third quarter of 2012. If after these factors are considered and management determines that it is not likely that the fair value is less than the carrying value then step 1 and step 2 of the test are unnecessary. Considering that Galaxy management did not perform the interim step 1 test, I would assume that they came to the determination that fair value would not have dropped to less than carrying value. According to the FASB standards this...
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...Xinyun Zhang ACCT325 Individual Case Goodwill Impairment at Jackson Enterprises Case 1. When is a company required to perform the two-step test for goodwill impairment? Explain in your own words and provide citation from the ASC. Goodwill is considered impaired when the implied fair value of goodwill in a reporting unit of a company is less than its carrying amount, or book value, including any deferred income taxes. By qualitative factors, if the fair value is less than its book value (likelihood more than 50%), two step of the goodwill impairment test is necessary. According to ASC 350-20-35-2 and 3(A&B&D), if the company determines that it is not more likely than not that fair value is less than the book value, it does not need to perform the two-step impairment test. 2. What qualitative factors should a company consider in determining whether the two-step test should be conducted? List each of these factors for Dynamic and ZD. Explain in your own words and provide citation from the codification. Based upon the case information, do you believe that goodwill is impaired for Dynamic and ZD separately company? Dynamic Qualitative Factors | Citation | Simple manufacturing process technology in this industry increased competitors by 35%. The increase in overall market supply may cost Dynamic depressed product prices. Therefore, their profitability would decline. | ASC 350-20-35-3C(b) | Both regulators and union representatives claimed that pollution...
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... What goodwill is and how it is represented on a company's financial statements are two different issues. For example: until recently, if a company sold for $5 million, but only had $1 million in tangible assets, the balance of $4 million was considered goodwill. Under previous accounting standards, this goodwill had to be amortized by the acquirer over a 15-year period. This especially affected public companies, since an acquisition could negatively impact earnings, thus reducing the price of its stock. One result of this was that public companies were reluctant to acquire firms in which goodwill was a large part of the purchase price. On the other hand, purchasers of non-public firms received a tax break because of the amortization. goodwill efforts that your employer undertakes ----- * Phantom Assets *...
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...ftThere is one machine included in our non-current (fixed) assets that used to have a book value of £120 000 previously. However, we estimated that should we sell it in the market we would get £90 000 – but we would need to spend £1 000 on advertising costs to sell it. If we don’t sell it, it will produce cash inflows of £40 000 per year for the next four years, and £30 000 the year after (by the way, the company’s discount rate is 10%). After that, the machine’s useful life will come to an end. I haven’t done any asset impairments yet, but if you believe this asset should be impaired, please make the appropriate adjustments to the statements (please justify your adjustments, send me all the calculations and decision diagrams so I can see what you did and how you did it – thanks!). 有一台机器包含在固定资产里以前book value 120，000. 可是我们估计如果我们卖掉我们可以拿到90，000. 但是我们需要花1000在宣传上。 如果我们不卖，他会产生40，000 每年的现金流入在接下来的4年，和之后的30000每年。减价率是10%。 在那之后这个机器的寿命就到头了。我没做任何资产减值然而,但如果你相信这个资产应该受损,请给出理由。 40 000*4+30 000=190，000 recoverable 89 000- 190 000=-101，000 carry value=book val ue是120 000 recoverable amount = selling price – cost – value in use =90 000-1000-（190 000*0.1） =89 000- 19 000=70 000 〈 carry value Also, in the last year our Company purchased a new piece of equipment at the price of £300 000 (this is already included in the Trial Balance figures). The cost of delivery...
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...) The key differences arise from the use of shorter amortization periods for (1) unrecognized prior service costs, and (2) unrecognized actuarial differences. These latter items likely reflect unrecognized gains and losses, and would include asset gains and losses. Under U.S. GAAP, amortization periods are based on remaining service lives of employees, which is probably longer than five or ten years. One other difference that students might note are the relatively low discount rate and expected return assumptions used by this Japanese company. For example, Procter and Gamble (and many U.S. companies) use rates up to three times as high as the rates used by this Japanese company. It should be noted that there are several similarities. Under Japanese GAAP, the pension obligation is measured based on the projected benefit obligation and amount recognized is based on an amount net of the liability and plan assets. There is smoothing of gains and losses. Also, the components of pension expense are similar. (b) Shorter amortization periods will result in higher pension expense with respect to prior service costs. Depending on whether the company has unrealized gains or losses, the shorter amortization period for the actu- arial differences may result in either higher or lower reported income. On the balance sheet, there will be less non-recognition of the prior service costs and gains and losses. So the net pension asset or...
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...ACCT 301 – intermediate Accounting 1 Case Study Due date: December 3, 2015 Objectives of the Case: This case gives students the opportunity to apply the guidance in ASC 350 to determine: • What goodwill impairment indicators should be evaluated. • Whether an interim period step 1 impairment test should be performed Applicable Professional Pronouncements: ASC 350-20, Intangibles — Goodwill and Other: Goodwill (ASC 350-20) ASC 820, Fair Value Measurement (ASC 820) Research Databases: Use the FASB Accounting Standards Codification Database to research the authoritative literature (FASB pronouncements) relevant to the issues in question. The web link and login information of the database is available on D2L. Instructions: a) Your name, class section, and responses must be typed on this document. b) Write your answer right below each question using ARIAL font size 11 unless specified otherwise. c) Your responses must be clear, concise, supported with persuasive arguments, and free from grammatical and spelling errors. d) There is no limit on the length of your response. e) Two submission formats are required: (1) an electronic version must be submitted via designated D2L drop box, and (2) a hard copy version must be submitted at the beginning of the class on the due date. Late submission will not be accepted (no exceptions). f) For hard copy submission, only print the cover page and the pages containing your responses. It must be...
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...Excel (such as left, right, mid). 6. How can you put date in Excel? What are its uses? 7. What is NETWORKINGDAYS function in Excel? What is NETWORKINGDAYS.INT function in Excel? What are its uses? 8. What is workday and WORKDAY.INT functions in Excel? What are its uses? 9. What is Net Present Value? How do NPV and XNPV function work in Excel? What are its uses? 10. What is internal rate of return (IRR)? How do IRR, XIRR, and MIRR work in Excel? What are its uses? 11. What is present value? How does PV function work? What are its uses? 12. What is Future Value? How does FV function work? What are its uses? 13. Write down the functions of PMT, PPMT, IPMT. How can you use these functions to prepare a loan amortization schedule? 14. Write down the function of IF Statement, AND, OR and XOR. 15. Describe different Time functions. What are its uses? 16. What is What If Analysis? Describe different kind of what if analysis. What are its uses? 17. What do you mean by Sensitivity Analysis? What are its uses? 18. Describe difference between What if analysis and sensitivity analysis. 19. What is data table? How do one-way and two-way data tables work in Excel? What are their uses? 20. What is scenario manager? Describe the process of using scenario manager. 21. What is the importance of sensitivity analysis?...
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...Case 8 Paying Off That Dream House 37 8 Loan Amortization costs) advertised at 5% and 30-year rates at 5.75%. Evelyn and Paul realize that refinancing is quite a hassle due to all the paperwork involved but with rates being down to 30-year lows, they don't want to let this opportunity pass them by. About 2 years ago, rates were down to similar levels but they had procrastinated, and had missed the boat. This time, however, the couple called their mortgage officer at the Uptown Bank and locked in the 5%, 15-year rate. Nothing was going to stop them from reducing the costs of paying off their dream house this time! Questions: 1. What is Evelyn and Paul's monthly mortgage payment prior to the refinancing? Paying Off That Dream House 2. During the first 5 years of owning their dream home, how much money has the couple paid towards the mortgage? What proportion of this has been applied towards interest? 3. Had the couple opted for the original I5-year mortgage proposal (15 year, 8%), how much higher would their monthly payment have been? When Evelyn and Paul Peters were "house hunting" five years ago, the mortgage rates were pretty high. The fixed rate on a 30-year mortgage was 8.75% while the I5-year fixed rate was at 8%. After walking through many homes, they finally reached a consensus and decided to buy a $200,000 two-story house in an up and coming suburban neighborhood in the Midwest. To avoid prepaid mortgage insurance (PMI) the couple had to borrow...
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...Loan project: Buying a House in Virginia Beach, VA Task 1: House Description I decided to choose a house in close vacinity of where I currently reside because my family is in the process of looking for a home. Currently, we live in military housing, and this is an excellent chance to view different homes, areas, schools, and costs that are associated with the buying a home. The informative process will prove to be benefical on both a professional and personal level. Asking Price: $430,000 Real Estate Taxes: $3,277.32 (found at: http://www.vbgov.com Virginia Beach, VA real estate assessor database) Purchase Price: $352,400 (The 2013/2014 Assessed Property Value) Current market Interest Rate (30 Yr. Fixed Rate): 4.047% through Absolute Mortgage Company on www.bankrate.com by zipcode 23464 Task 2: 20% Down Payment: $352,400(.20) = $70,480 Amount Financed: $352,400-$70,480=$ 281,920 Monthly Mortgage Payment: $1358.58 Payment Calculation: * Present value PV = $281,920 * Annual interest rate r = 0.04047 * Interest compounded m = 12 times per year * Number of payments n = 30 years X 12 months per year= 360 * Interest rate per month i=r/m = 0.04047/12 The monthly mortgage payment PMT is: PMT=PV * i/1-(1+i)^-n = $281,920 * 0.0033725/1-(1+0.0033725)^-360 = $281,920(0.0048012887) = $1353.58 Remark: For accuracy of the payment amount, rounding of two decimal points was not completed until the last step. Task...
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...and FV _ 100— and then solve for the unknown value. SOLVING FOR n Suppose you know that a security will provide a return of 10 percent per year, it will cost $68.30 to purchase, and you want to keep the investment until it grows to a value of $100. How long will it take the investment to grow to $100? In this case, we know PV, FV, and r, but we do not know n, the number of periods. Using your financial calculator, enter I/Y _ 10, PV _ –68.30, PMT _ 0, and FV _ 100; then solve for n _ 4. Compounding: To compute the future value of an amount invested today (a current amount), we “push forward” the current amount by adding interest for each period in which the money can earn interest in the future. This process is called compounding Amortization schedule: A schedule showing precisely how a loan will be repaid. It gives the payment required on each payment date and a breakdown of the payment, showing how much is interest and how much is repayment of principal One of the most important applications of compound interest involves loans that are paid off in installments over time. Included in this category are automobile loans, home mortgages, student loans, and some business debt. If a loan is to be repaid in equal periodic amounts (monthly, quarterly, or annually), it is said to be an amortized loan. To illustrate, suppose that you...
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...Контрольна робота з предмету: «Бухгалтерський облік» Методи нарахування амортизації необоротних активів. Облік зносу необоротних активів У процесі виробництва як і основні засоби, так і не матеріальні активи втрачають свою вартість і у вигляді амортизаційних відрахувань переносять її на створювані на підприємстві продукцію, роботи, послуги, а також окремою статтею входять до складу адміністративних та інших витрат. Порядок нарахування і використання амортизаційних відрахувань основних фондів і нематеріальних активів визначено як податковим законодавством, так і П(С)БО №7 «Основні засоби» та «П(С)БО №8 «Нематеріальні активи». Амортизація основних фондів та інших необоротних активів нараховується з застосуванням наступних методів: * прямолінійного (прямолінійного списання); * зменшення залишкової вартості; * прискореного зменшення залишкової вартості; * кумулятивного (суми чисел років); * виробничого (метод суми одиниць продукції). Також підприємства за своїм розсудом можуть застосовувати норми і методи нарахування амортизації основних засобів, передбачені податковим законодавством. Основні фонди підлягають розподілу за такими групами: група 1 - будівлі, споруди, їх структурні компоненти та передавальні пристрої, в тому числі жилі будинки та їх частини (квартири і місця загального користування, вартість капітального поліпшення землі); група 2 - автомобільний транспорт та вузли (запасні частини) до нього; меблі; побутові електронні, оптичні, електромеханічні...
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