Accounting Walk Thru - Asset Purchase
Can someone help with this accounting walk thru? Cannot seem to balance for Year 1 and unsure how to proceed for Year 2.
Imagine you purchased a machine using $50 cash and $50 debt that generates $20 of revenue per year. Assuming a 5 year useful life, straight-line depreciation with no salvage value 30% tax rate, 10% interest rate and bullet amortization, how will this affect the financial statements at the end of years 1, 2 and 5?"
Year 1
I/S
+20
(-200.7) + (-500.1*0.7) [D&A + Interest Exp]
NI: +2.5
CFS
NI: +2.5
D&A: +20
CF Ops: +22.5
CF Investing: -100
CF Financing: +50
NCF: -27.5
BS
Cash: -27.5
PP&E: -20 (D&A at the end of Year 1)
Assets: -47.5
Liabilities: +50
Equity: +2.5
L + E: 52.5
WHAT IS WRONG HERE? ALSO, can someone just do a walk thru for Year 2 please? THANKS!
dude i did this one for you and it balanced. go back to the other topic you fucked up PPE this time u noob !
I didn't post this question, someone else must have. But I see your point now, PP&E should be 80 [$100 (original purchase price) - $20 [end of year 1 depreciation] = $80), then it balances (+52.5 on both sides) Thanks.
Can you help with BS for year 2?
IS: NI: +2.5 (same as above)
CFS NI: +2.5 D&A: +20
NCF: +22.5
BS Cash: +22.5 PP&E: 60
SE: +2.5 ????
@dick_fluid: Do you see my problem? Can you help? Pretty please.
Since you considered the changes from scratch, PPE is -20 and not 60. 60 is what u would have gotten if u straight accounted for both Y1 & Y2 at the same time. q_q
Got it, thanks. So in that case, why do we indicate 80 for PPE at the end of Y1 and not simply -20 (ie the decrease in PPE) like we do for at the end of Y2? Thanks a ton.
Why are you indicating positive net income?... 20 revenue - 20 depreciation - interest... Then you account for tax (benefits in this case).
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