1. Future Star Company produces a variety of coverings for electrical wiring. On January 1, 2020 it acquired new production equipment at a cost of $500,000. The machine has an expected life of three years and an estimated salvage value of $50,000.

Required: 1. Prepare a 3-year depreciation schedule for the machinery under:

a. Straight-line method.

b. Reducing-balance method.

2. Assume that on January 1, 2021 the company disposed of machine for $300,000. Under the reducing-balance method, compute the gain or loss on disposal for financial reporting purpose.

(10 marks)

2. Ahmed started a business on 1^st January 2019 selling printers. He bought 5000 printers at a cost of $80 each at the beginning of his accounting year. On May 1^st, 2019 he bought a further 3500 printers, but the cost had risen by this stage from $80 to $120. At the accounting year end on 31^st December 2019, Ahmed had 2500 printers in inventory. He sold the others during the year for $200 each.

Required:

Calculate the value of Ahmeds inventory on 31^st December 2019 using:

1. FIFO
2. LIFO
3. Calculate Gross profit