Solve the following problems:
1. Prepare a depreciation schedule for the assets in the following transactions using the straight line method of depreciation:
A. Flash Enterprises purchased 3 new delivery trucks at a cost of $45,000 each. Each truck has an estimated useful life of 5 years.
B. Flash needed a new forklift to be used in warehouse operations at a cost of $12,500. The old forklift was traded in for $1,500. The new forklift has an estimated useful life of 4 years.
2. Analyze the results of the below:
A. Flash has an opportunity to sell one of the trucks from (1A) above after 3 years for a price of $15,000. Should they accept the offer? Why or why not?
B. The used forklift from (1B) above had an original cost of $10,000 and a book value of $500 at the time of trade in. Calculate any gain or loss and show the appropriate journal entry.
3. Inventory Evaluation:
|
units
|
unit cost
|
total cost
|
|
Beginning inventory
|
160,000
|
$2.00
|
$320,000
|
|
Purchase 1
|
60,000
|
$2.50
|
$150,000
|
|
Purchase 2
|
60,000
|
$3.50
|
$210,000
|
|
Ending Inventory
|
30,000
|
|
|
A. Calculate the value/cost of ending inventory & cogs using the following methods:
LIFO
FIFO
AVG COST
B. Assuming the company has NOT determined which inventory method to use, Which method should they use for income tax purposes? Why?
C. The sold units had an average price of $6.00. Calculate gross profit and gross profit % using the method you chose in (B).