The Bellcamp Soup Company uses the straight-line depreciation for financial repo
ID: 2711233 • Letter: T
Question
The Bellcamp Soup Company uses the straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The company’s tax rate is 35%. The following information is extracted from the company’s financial statements (amounts in $ millions).
Year 10
Year 11
Depreciation Expense
175.9
184.1
Net Income
4.4
401.5
Net Plant, Property and Equipment
1,717.7
1,790.4
Total Assets
4,115.6
4,149.0
Retained Earnings
1,653.3
1,912.6
Deferred Tax Liability--Plant (from Notes)
184.6
175.6
As an analyst, you have decided to adjust the company’s financial statements to reflect the conversion from straight-line to accelerated depreciation. Use the information provided to calculate the adjusted values for Year 11 of the following:
a.
Net Plant, Property and Equipment.
b.
Retained Earnings.
c.
Net Income.
Year 10
Year 11
Depreciation Expense
175.9
184.1
Net Income
4.4
401.5
Net Plant, Property and Equipment
1,717.7
1,790.4
Total Assets
4,115.6
4,149.0
Retained Earnings
1,653.3
1,912.6
Deferred Tax Liability--Plant (from Notes)
184.6
175.6
Explanation / Answer
ANSWER:
The dealer can infer that the proportion of all customers who still own the cars they purchased at the dealership 6 years earlier is somewhere between 03712 and 0.5088 with a 95% level of confidence.
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