Crash Course in Accounting and Financial Statement Analysis, Second Edition

Reconciliation of PP&E

[View full size image]

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. [View full size image]

7. Lemonade Stand

Solution 1: [View full size image]

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 ...