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    1) The document appears to be analyzing the accounting treatment of assets and how it affects key financial metrics like income, cash flow, and return on assets under both capitalization and expense methods. 2) It shows the revenue, depreciation, book value, and other financial impacts over 9 years from operating assets under different capitalization and expense scenarios. 3) The graphs at the end compare the income, cash flow from operations, and return on assets between capitalizing versus expensing assets over the 9 year period.

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    1) The document appears to be analyzing the accounting treatment of assets and how it affects key financial metrics like income, cash flow, and return on assets under both capitalization and expense methods. 2) It shows the revenue, depreciation, book value, and other financial impacts over 9 years from operating assets under different capitalization and expense scenarios. 3) The graphs at the end compare the income, cash flow from operations, and return on assets between capitalizing versus expensing assets over the 9 year period.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    2 views2 pages

    07 Notes Example

    Uploaded by

    Pratheep Gs
    1) The document appears to be analyzing the accounting treatment of assets and how it affects key financial metrics like income, cash flow, and return on assets under both capitalization and expense methods. 2) It shows the revenue, depreciation, book value, and other financial impacts over 9 years from operating assets under different capitalization and expense scenarios. 3) The graphs at the end compare the income, cash flow from operations, and return on assets between capitalizing versus expensing assets over the 9 year period.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    of 2

    1 of 2

    100127

    Chapter 7: Pages 230, corrections and explanations


    New asset cost
    Revenue per asset per year
    June 30
    V
    Buy
    30
    20
    10

    Revenue
    Depreciation

    Income
    Book value of asset

    Example for LL Assets Revised

    120
    60

    Dec 31

    Other Asset Base


    Other Income

    Dec 31

    1,000
    150

    Dec 31

    60
    40
    20

    June 30
    V
    Retire
    30
    20
    10

    60
    40
    20

    100

    60

    20

    CAPitalize

    EXPense

    CAP: Income

    CAP: ROA

    EXP: CFO=Income

    EXP: ROA

    Bigger Income?

    Bigger ROA ?

    4
    2
    5

    CFI

    100
    240
    200
    540

    CAP: CFO

    20
    60
    100

    Book Value, End

    x
    x
    x

    Total Depcn Expense

    5
    4
    2

    1,000
    1,500
    1,700
    1,540 100
    1,700 80
    1,740 40
    1,540 100
    1,700 80
    1,740 40

    1st year asset

    Total Revenue
    300
    570
    750
    810
    810
    810
    810
    810
    810

    2nd year asset

    Revenue from assets


    150
    420
    600
    660
    660
    660
    660
    660
    660

    Exp

    3rd year asset

    # of operating Assets
    2.5
    7.0
    10.0
    11.0
    11.0
    11.0
    11.0
    11.0
    11.0

    4rd year asset

    Purchase

    5
    4
    2
    5
    4
    2

    5
    4
    2
    5
    4
    2
    5
    4
    2

    5
    4
    2

    Beginning Assets

    Replace

    1
    2
    3
    4
    5
    6
    7
    8
    9

    Growth

    Year

    Depreciation

    200
    160
    80
    200
    160
    80
    200

    200
    160
    80
    200
    160
    80
    200
    160

    100
    80
    40
    100
    80
    40
    100
    80
    40

    100
    280
    400
    440
    440
    440
    440
    440
    440

    1,500
    1,700
    1,540
    1,700
    1,740
    1,540
    1,700
    1,740
    1,540

    300
    570
    750
    810
    810
    810
    810
    810
    810

    (600)
    (480)
    (240)
    (600)
    (480)
    (240)
    (600)
    (480)
    (240)

    200
    290
    350
    370
    370
    370
    370
    370
    370

    18.1%
    21.6%
    22.8%
    21.5%
    22.6%
    22.8%
    21.5%
    22.6%

    (300)
    90
    510
    210
    330
    570
    210
    330
    570

    9%
    51%
    21%
    33%
    57%
    21%
    33%
    57%

    Cap
    Exp
    Cap
    Cap
    Exp
    Cap
    Cap
    Exp

    Cap
    Exp
    Cap
    Exp
    Exp
    Cap
    Exp
    Exp

    x
    x
    x

    20
    60
    100

    80
    120
    500
    700

    2 of 2

    Example for LL Assets Revised

    1,000
    800
    600
    400
    200
    0

    CAP: Income

    (200)

    EXP: CFO=Income
    (400)

    CAP: CFO

    60.0%

    CAP: ROA
    EXP: ROA

    50.0%

    40.0%

    30.0%

    20.0%

    10.0%

    0.0%
    1

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