Depreciation Calculate the annual depreciation for the following assets for the
ID: 2480316 • Letter: D
Question
Depreciation Calculate the annual depreciation for the following assets for the entire lifespan of each asset. Each asset will have a different method to utilize. In addition, complete the applicable journal entries for each asset for tax year 2014 using the journal entry template.
Land: 25 acres valued at $56,000, inherited, currently in Year 2.
Warehouse: Built in 2012—started to use on 1/6/2012, basis $39,000, residual value $10,000, 30-year life uses straight-line depreciation—currently in year three.
Machinery: Straight line cost $22,000, $6,000 residual value, five-year life—purchased 10/1/2012, currently in year three.
2010 Truck: Cost $20,000, no residual value, four years, purchased and started using on 1/1/2014—currently year two
. Cost of Goods Sold
Calculate the cost of goods sold using LIFO for the equipment sold, using the following information. Use those cumulative amounts, to calculate the gross income for 2014.
1. Blood Pressure Monitors: 2014 Annual sales of 250 units Ending Inventory is 60 units.
Units
Unit Cost
Total Cost
Beginning Inventory
257
350
$89,950
Purchase 1
85
345
$29,325
Purchase 2
300
330
$99,000
2. Ultrasound Scanners:
2014 Annual sales of 2,600 units
Ending Inventory is 1,350.
Units
Unit Cost
Total Cost
Beginning Inventory
654
400
$261,600
Purchase 1
250
435
$108,750
Purchase 2
1000
400
$40,000
Ensure that you include detailed calculations that helped you to arrive at the solution.
Submission Requirements:
Submit the updated journal entries template and your response as a Word document to the instructor for evaluation.
Font: Arial, 12 point
Line spacing: Double
Units
Unit Cost
Total Cost
Beginning Inventory
257
350
$89,950
Purchase 1
85
345
$29,325
Purchase 2
300
330
$99,000
Explanation / Answer
The journal entry for depreciation on assets for the year 2014 is as under: The asset land is not depreciated therefore no depreciation expense will be booked on land. The depreciation on Warehouse on straight line depreciation method is calculated as under: Depreciation on warehouse=(cost-salvage value)/useful life of asset Depreciation on warehouse=($39,000-$10,000)/30 Depreciation on warehouse for the year 2014=$966.67 The depreciation on machinery for the year 2014 is calculated as under: Depreciation on machinery=(Cost-salvage value)/useful no. of years Depreciation on machinery=($22,000-$6,000)/5 Depreciation on machinery=$$3,200 The depreciation on Truck for the year 2014: Depreciation on Truck=(Cost-salvage value)/useful no. of years Depreciation on Truck=($20,000-$0)/4 Depreciation on Truck=$5,000 The journal entry for depreciation expense is as under: Depreciation-warehouse $966.67 Depreciation-Machinery $3,200 Depreciation-Truck $5,000 Accumulated Depreciation $9,166.67 (Being depreciation on warehouse, machinery and Truck recorded) Calculation of cost of goods sold for the year 2014 is as under: The number of units sold during the year 250 units Cost of goods sold calculation at LIFO method is as under: The cost of 250 units will be calculated at the rate of last purchase which is purchase 2 that is $330 per unit. The cost of goods sold of 250 units would be (250 units @ $330 per unit)=$82,500 The calculation of cost of ending inventory of 60 units will be made at the rate of $350 per unit which is beginning inventory rate. Therefore the cost of ending inventory would be =(60 units ×$350)=$21,000 The cost of goods sold of 2,600 units of ultrasound scanners will be calculated at the rate of last purchase made which is at the rate of $400 per unit The cost of goods sold of 2,600 units of ultrasound scanners = (2,600×$400)= $1,040,000 The calculation of cost of ending inventory of 1,350 units will be made at the rate of $400 per unit which is beginning inventory rate. Therefore the cost of ending inventory would be =(1,350 units ×$400)=$540,000 The cumulative gross profit for the year 2014 can be calculated if sales price per unit is given in question. Therefore we are unable to calculate the gross profit for the year 2014 here. Gross profit=Sales-cost of goods sold
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