Depreciation and Disposal--A Comprehensive Problem

question 19

Essay

Depreciation and disposal--a comprehensive problem
Domino,Inc.uses straight-line depreciation with a half-year convention in its financial statements.On March 10,2010,Domino acquired a computer system at a cost of $98,800.Estimated useful life is six years,with residual value of $5,200.
(a)Complete the following schedule,showing depreciation expense Domino expects to recognize each year in the financial statements. (b)Assume Domino sells the computer system on October 3,2013,for $26,650.

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Definitions:

EBIT

Stands for Earnings Before Interest and Taxes, and is an indicator of a company's profitability excluding interest and tax expenses.

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time, typically expressed as an annual rate.

Cash Coverage Ratio

A financial metric that measures a company’s ability to cover its debt obligations with its operating cash flow.