Rent-Way

Depreciation
Unit of Activity Dep
Cost of Mine 1000000
Capacity 100 tons of gold
Unit of Activity Dep 10000 per ton of gold

Cost of Oil Well 2000000

Capacity 20000 Barrells
Unit of Activity Dep 100 per Barrell

Cost 100
Life 3 years
Rental Days per year 360 days
Dep Cost per day 0.093
Avg Rental per year 250 days

SLM Dep per year Units of Activity Dep per year

1 33.33333 1 23.14815
2 33.33333 2 23.14815
3 33.33333 3 23.14815
Book Value after 3 years 0 Book Value after 3 years 30.6

Typically good companies conduct an impairment test for their assets because assets are valued at lower of cost or market
Rent-Way never conducted any impairment tests
at lower of cost or market
Goodwill

MV of Net Assets 200

Purchase Price 240
Goodwill 40

Rent-Way policies
MV of Net Assets 160
Purchase Price 240
Goodwill 80
Interest Calculations
Interest Rate 0.05
Year Loan Principle Repaid Balance Interest Rentway Policies
1 10000 2000 8000 400 200
2 8000 2000 6000 300 200
3 6000 2000 4000 200 200
4 4000 2000 2000 100 200
5 2000 2000 0 0 200
Total 1000 1000 Total

Assets = Liabilities + Reve/Exp + Owner's Equity

Year 1
-400 Cash -200 Int Exp
200 Prepaid Int.