Question Description
For this assessment, complete Problems 1 and 2. You may use Word or Excel to complete the assessments throughout this course, but you will find Excel to be most helpful for creating spreadsheets. Tutorials for using Excel are provided in the Supplemental Resources in the left navigation menu. If you use Excel, submit the assessment in one Excel document, using separate tabs for each spreadsheet.
To complete the first problem, you may choose to use the Assessment 6, Problem 1 Template linked in the Suggested Resources under the Capella Resources heading.
Problem 1: The Effects of Different Cost Flow Assumptions for Inventory
At the end of January 2011, the records of Sheldon and Blair showed the following for a particular item that sold at $20 per unit:
| Transactions | Units | Total Amount |
|---|---|---|
| Inventory, January 1, 2011 | 500 @ $6.00 | $3,000 |
| Purchase, January 12 | 600 @ $7.00 | $4,200 |
| Purchase, January 26 | 200 @ $7.10 | $1,420 |
| Sale | (400 units sold for $20 each) | |
| Sale | (300 units sold for $20 each) |
Based on the information provided in the table above, complete the following. An optional template, Assessment 6, Problem 1 Template, is provided in the Suggested Resources under the Capella Resources heading.
- Assuming the use of a periodic inventory system, prepare a summarized income statement through gross profit for the month of January under each method of inventory listed below. Show the inventory computations for each method in detail.
- a. Average cost. (Round the average cost per unit to the nearest cent.)
- b. First in, first out (FIFO).
- c. Last in, first out (LIFO).
- d. Specific identification. (Assume that the first sale was selected from the beginning inventory and the second sale was selected from the January 12 purchase.)
- Of FIFO and LIFO, which method would result in the higher pretax income? Which would result in the higher EPS?
- Of FIFO and LIFO, which method would result in the lower income tax expense? Explain, assuming a 35 percent average tax rate.
- Of FIFO and LIFO, which method would produce the more favorable cash flow? Explain.
Problem 2: The Effects of Differing Depreciation Methods
Total Workout, Inc. purchased three ï¬ï¿½tness machines from Ace Used Equipment at the beginning of the year. All three were used machines that had to be overhauled and installed before they were put into use. The costs of the machines and their renovation and installation are shown in Table 1 below:
| Account | Machine A | Machine B | Machine C |
|---|---|---|---|
| Amount paid for asset | $21,000 | $30,750 | $8,000 |
| Installation cost | $500 | $1,000 | $200 |
| Renovation costs prior to use | $2,000 | $1,000 | $1,500 |
By the end of the first year, each machine had been operating 4,800 hours. Depreciation estimates are shown in Table 2 below:
| Machine | Life | Residual Value | Depreciation Method |
|---|---|---|---|
| A | 5 years | $1,000 | Straight-line |
| B | 60,000 hours | $2,000 | Units-of-production |
| C | 4 years | $1,500 | Double-declining balance |
Using the data provided above, complete the following:
- Compute the cost of each machine.
- Give the entry to record depreciation expense at the end of the first year, using all three depreciation methods listed in Table 2.
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Place Order” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.