need help with #3 P Company\'s fiscal year runs from January to December 31. P C
ID: 2772958 • Letter: N
Question
need help with #3
P Company's fiscal year runs from January to December 31. P Co. acquires and installs into operations a new truck on October 1,2013 at a total cost of $360,000 and has an estimated useful life of four years and estimated salvage value of $40,000. Required Prepare a depredation schedule showing Net Book value (beginning and ending), depreciation expense, and accumulated depreciation for the asset. Prepare one schedule for each method: Straight-line Double-declining balance K Company receives an offer for the truck for $140,000 at the end of the third year What factors should K Company consider in determining whether to sell or keep the truck? Assume the truck is sold. Prepare the appropriate journal entries showing sale of the truck under each depreciation method. Which inventory method would you recommend (or reporting for income tax purposes? Why? The company is operating in an inflationary environment. Which method should the company use to maximize inventory valuation? Why? Should the replacement cost be used to value the inventory for any of the methods? Why?Explanation / Answer
Company should use FIFO method.
Under FIFO method, inventory cost represents recent stock prices. Since, the economic condition is increase in prices, stocks will be valued at high cost. i.e. at recent purchase prices.
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