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Chapter 8: Q21E (page 390)

Refer to the statement of cash flows for Google in Appendix A for the fiscal year ended December 31, 2015, to answer the following.

  1. What amount of cash is used to purchase property and equipment?
  2. How much depreciation and impairment of property and equipment are recorded?
  3. What total amount of net cash is used in investing activities?

Short Answer

Expert verified
  1. The amount of cash used to purchase property and equipment is $9,915 million.
  2. The depreciation and impairment of property and equipment in the statement of cash flows is $4,132 million.
  3. The amount of net cash used in investing activities is $23,711 million.

Step by step solution

01

Cash used in property and equipment

Property and equipment: - Property and equipment is the tangible long-lived assets used to produce or sell products and services. It is also known as plant assets or fixed assets.

The amount of cash used to purchase property and equipment is $9,915 million.

02

Depreciation and impairment of property and equipment

Depreciation: - depreciationis the overall decrease in the value of the assets from the use of the asset.

Impairment: - impairmentrefers to the permanent decline in the fair value of an asset relative to its book value. In this case, the company writes the asset down to this fair value

The depreciation and impairment of property and equipment in the statement of cash flows is $4,132 million.

03

Total amount of net cash used in investing activities

Investing activities: -investing activitiesare those activities that involve the inflow and outflow of cash from the business for the purchase and sale long term assets and other business investments

The amount of net cash used in investing activities is $23,711 million.

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Most popular questions from this chapter

On January 1, 2010, Mason Co. entered into a 12-year lease on a building. The lease contract requires (1) annual (prepaid) rental payments of \(36,000 each January 1 throughout the life of the lease and (2) for the lessee to pay for all additions and improvements to the leased property. On January 1, 2017, Mason decides to sublease the space to Stewart Co. for the remaining five years of the lease—Stewart pays \)40,000 to Mason for the right to sublease and agrees to assume the obligation to pay the \(36,000 annual rent to the building owner beginning January 1, 2017. After taking possession of the leased space, Stewart pays for improving the office portion of the leased space at a \)20,000 cost. The improvements are paid for by Stewart on January 3, 2017, and are estimated to have a useful life equal to the 13 years remaining in the life of the building.

Required

  1. Prepare entries for Stewart to record (a) its payment to Mason for the right to sublease the building space, (b) its payment of the 2017 annual rent to the building owner, and (c) its payment for the office improvements.
  2. Prepare Stewart’s year-end adjusting entries required on December 31, 2017, to (a) amortize the $40,000 cost of the sublease, (b) amortize the office improvements, and (c) record rent expense.

Question: On January 2, 2017, the Matthews Band acquires sound equipment for concert performances for \(65,800. The band estimates it will use this equipment for four years, during which time it anticipates performing about 200 concerts. It estimates that after four years it can sell the equipment for \)2,000. During the year 2017, the band performs 45 concerts. Compute the year 2017 depreciation using the unit-of-production method.

On January 1, 2017, Robinson Company purchased Franklin Company at a price of \(2,500,000. The fair market value of the net assets purchased equals \)1,800,000.

1. What is the amount of goodwill that Robinson records at the purchase date?

2. Explain how Robinson would determine the amount of goodwill amortization for the year ended December 31, 2017.

3. Robinson Company believes that its employees provide superior customer service, and through their efforts, Robinson Company believes it has created $900,000 of goodwill. How would Robinson Company record this goodwill?

York Instruments completed the following transactions and events involving its machinery.

2016

Jan. 1 Paid \(107,800 cash plus \)6,470 in sales tax for a new machine. The machine is estimated to have a six-year life and a \(9,720 salvage value.

Dec. 31 Recorded annual straight-line depreciation on the machinery.

2017

Dec. 31 Due to new information obtained earlier in the year, the machine’s estimated useful life was changed from six to four years, and the estimated salvage value was increased to \)14,345. Recorded annual straight-line depreciation on the machinery.

2018

Dec. 31 Recorded annual straight-line depreciation on the machinery.

31 Sold the machine for $25,240 cash. Required Prepare journal entries to record these transactions and events.

Listed below are certain costs (or discounts) incurred in the purchase or construction of new plant assets. (1) Indicate whether the costs should be expensed or capitalized (meaning they are included in the cost of the plant assets on the balance sheet). (2) For costs that should be included in plant assets, indicate in which category of plant assets (Equipment, Building, or Land) the related costs should be recorded on the balance sheet.

  1. Charges incurred to train employees to use new equipment
  2. Invoice cost to purchase new equipment
  3. Deduction for an early payment discount taken on the purchase of new equipment
  4. Real estate commissions incurred on land purchased for a new plant
  5. Property taxes on land incurred after it was purchased
  6. Costs of tune-up for the truck used to deliver new equipment
  7. Costs to lay the foundation for a new building
  8. Insurance on a new building during the construction phase
See all solutions

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