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Crash Course in Accounting and Financial Statement Analysis, Second Edition by Arkady Libman, Matan Feldman

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Reconciliation of PP&E

7. Lemonade Stand
Exercise
Q1:Recall that on January 1, 2005, you bought a lemon squeezer and a lemonade stand for $30. You estimate that both of these fixed assets will have a useful life of three years, upon which they will be obsolete and be thrown away (assume straight-line depreciation).

Calculate PP&E at the end of 2005, 2006, and 2007.

7. Lemonade Stand
Solution
1:
8. PP&E
Exercise
Q1:A company has PP&E of $4,000 in January 1, 2006:
  • It records depreciation of $800 during 2006.

  • It buys five new machines for $500 during 2006.

  • It sells two old machines for $100 during 2006.

Calculate PP&E at December 31, 2006.

8. PP&E
Solution
1:
Beginning PP&E= $4,000
– Depreciation= –$800
+ New machines ...

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