Inventory and Depreciation Consider this Balance Sheet situation Three years ago Mr Jones bought a new machine that inserts pimentos into green olives He paid $10,000 for the machine, and it went happily to work and has been filling 5,000 green olives per day with bright red pimentos At the time of purchase, Mr Jones accountant told him that the standard useful life for this type of equipment was 10 years Mr Jones decided to use the straight line method to calculate depreciation Please answer the following questions 1 What amount would go on the Balance Sheet at the time of purchase 2 Where would this amount have been posted on the Balance Sheet 3 What is the current book value of the equipment 4 How much accumulated depreciation is posted Consider this Income Statement situation Mr Jones started the year with no olives in inventory He bought 5,000 green olives at 25 cents each in March, 10,000 at 50 cents each in July, and 10,000 at 75 cents each in November At year end he had 2,000 olives left in inventory Calculate his ending inventory value using 5 Average cost method 6 FIFO 7 LIFO 8 Which method should he use when he prepares his Income Statement to show the bank

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Inventory and Depreciation Consider this Balance Sheet situation  Three years ago Mr  Jones bought a new machine that inserts pimentos into green olives  He paid $10,000 for the machine, and it went happily to work and has been filling 5,000 green olives per day with bright red pimentos  At the time of purchase, Mr  Jones accountant told him that the standard useful life for this type of equipment was 10 years  Mr  Jones decided to use the straight line method to calculate depreciation  Please answer the following questions  1  What amount would go on the Balance Sheet at the time of purchase  2  Where would this amount have been posted on the Balance Sheet  3  What is the current book value of the equipment  4  How much accumulated depreciation is posted  Consider this Income Statement situation  Mr  Jones started the year with no olives in inventory  He bought 5,000 green olives at 25 cents each in March, 10,000 at 50 cents each in July, and 10,000 at 75 cents each in November  At year end he had 2,000 olives left in inventory  Calculate his ending inventory value using  5  Average cost method 6  FIFO 7  LIFO 8  Which method should he use when he prepares his Income Statement to show the bank

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Inventory and Depreciation Consider this Balance Sheet situation: Three years ago Mr. Jones bought a new machine

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Auditing and Assurance services an integrated approach

Inventory and Depreciation Consider this Balance Sheet situation: Three years ago Mr. Jones bought a new machine

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Auditing and Assurance services an integrated approach

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