#1: Prepare depreciation schedules: ALL FORMULAS MUST BE SHOWN USING EXCEL CALCULATIONS

P Companys 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.

Hint: pay attention to the dates of acquisition with respect to P Co.s fiscal year. Required:

1. Prepare a depreciation schedule showing Net Book value (beginning and ending), depreciation expense, and accumulated depreciation for the asset. Prepare one schedule for each method:

a. Straight-line b. Double-declining balance

Use this format for the depreciation schedules. Note that the "factor" column applies to D-D-Bl method and not straight-line. You can use this format for either methods; you won't use the factor column in your SL calculations.

Year	NBV beg	Factor	Depreciation expense	Accumulated Depreciation	NBV ending

2. K Company receives an offer for the truck for $140,000 at the end of the third year.

1. What factors should K Company consider in determining whether to sell or keep the

truck?

1. Assume the truck is sold. Prepare the appropriate journal entries showing sale of the

truck under each depreciation method.

#2: Inventory valuation:

	Units	Unit Cost	Total Cost
Beginning inventory	160,000	$2.00
Purchases:	#1	60,000	$2.25
	#2	60,000	$1.90
Ending inventory	30,000
Replacement cost on market	$2.20
1. Complete the following table:	All calculations must be indicated via Excel formulas
Method:	Ending inventory $
	FIFO
	LIFO
	Average cost

1. Which inventory method would you recommend for reporting for income tax purposes? Why?
2. The company is operating in an inflationary environment. Which method should the company use to maximize inventory valuation? Why?

4. Should the replacement cost be used to value the ending inventory for any of the methods? Why?