First-in First-Out method (FIFO) : In First-in-First-Out method, the costs of initial purchased items are sold first. The value of the ending inventory consists of the recent purchased items. Last-in First-Out method (LIFO): In Last-in-First-Out method, the costs of last purchased items are sold first. The value of the closing stock consists of the initial purchased items. Straight-line Depreciation : Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the salvage value is shown as below: Depreciation cost = ( Cost of the asset-Salvage value ) Estimated useful life of the asset Declining-balance depreciation: It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation ) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation: Annual depreciation = Purchase price × ( 2 Useful life ) To determine: Use of FIFO instead of LIFO

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Answer 1

Question

Chapter 13, Problem 6Q

a)

To determine

First-in First-Out method (FIFO): In First-in-First-Out method, the costs of initial purchased items are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in First-Out method (LIFO): In Last-in-First-Out method, the costs of last purchased items are sold first. The value of the closing stock consists of the initial purchased items.

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the salvage value is shown as below:

Depreciation cost = (Cost of the asset-Salvage value)Estimated useful life of the asset

Declining-balance depreciation:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Annual depreciation = Purchase price × (2Useful life)

To determine: Use of FIFO instead of LIFO

b)

To determine

Use of 6-year life instead of 9-year life machinery.

c)

To determine

To determine: Use of depreciation method

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The following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500 Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000. Sold merchandise to Abbey Corp; invoice amount, $36,000. Sold merchandise to Brown Company; invoice amount, $47,600. Abbey paid the invoice in (b) within the discount period. Sold merchandise to Cavendish Inc.; invoice amount, $50,000. Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods. Brown paid its account in full within the discount period. Sold merchandise to Decca Corporation; invoice amount, $42,400. Cavendish paid its account in full after the…

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The following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500 Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000. Sold merchandise to Abbey Corp; invoice amount, $36,000. Sold merchandise to Brown Company; invoice amount, $47,600. Abbey paid the invoice in (b) within the discount period. Sold merchandise to Cavendish Inc.; invoice amount, $50,000. Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods. Brown paid its account in full within the discount period. Sold merchandise to Decca Corporation; invoice amount, $42,400. Cavendish paid its account in full after the…

Answer 2

Question

Chapter 13, Problem 6Q

a)

To determine

First-in First-Out method (FIFO): In First-in-First-Out method, the costs of initial purchased items are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in First-Out method (LIFO): In Last-in-First-Out method, the costs of last purchased items are sold first. The value of the closing stock consists of the initial purchased items.

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the salvage value is shown as below:

Depreciation cost = (Cost of the asset-Salvage value)Estimated useful life of the asset

Declining-balance depreciation:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Annual depreciation = Purchase price × (2Useful life)

To determine: Use of FIFO instead of LIFO

b)

To determine

Use of 6-year life instead of 9-year life machinery.

c)

To determine

To determine: Use of depreciation method

Expert Solution & Answer

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See solution

Answer 3

Question

Chapter 13, Problem 6Q

a)

To determine

First-in First-Out method (FIFO): In First-in-First-Out method, the costs of initial purchased items are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in First-Out method (LIFO): In Last-in-First-Out method, the costs of last purchased items are sold first. The value of the closing stock consists of the initial purchased items.

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the salvage value is shown as below:

Depreciation cost = (Cost of the asset-Salvage value)Estimated useful life of the asset

Declining-balance depreciation:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Annual depreciation = Purchase price × (2Useful life)

To determine: Use of FIFO instead of LIFO

b)

To determine

Use of 6-year life instead of 9-year life machinery.

c)

To determine

To determine: Use of depreciation method

Expert Solution & Answer

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Answer 4

Question

Chapter 13, Problem 6Q

a)

To determine

First-in First-Out method (FIFO): In First-in-First-Out method, the costs of initial purchased items are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in First-Out method (LIFO): In Last-in-First-Out method, the costs of last purchased items are sold first. The value of the closing stock consists of the initial purchased items.

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the salvage value is shown as below:

Depreciation cost = (Cost of the asset-Salvage value)Estimated useful life of the asset

Declining-balance depreciation:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Annual depreciation = Purchase price × (2Useful life)

To determine: Use of FIFO instead of LIFO

b)

To determine

Use of 6-year life instead of 9-year life machinery.

c)

To determine

To determine: Use of depreciation method

Expert Solution & Answer

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Answer 5

Chapter 13, Problem 6Q

a)

To determine

First-in First-Out method (FIFO): In First-in-First-Out method, the costs of initial purchased items are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in First-Out method (LIFO): In Last-in-First-Out method, the costs of last purchased items are sold first. The value of the closing stock consists of the initial purchased items.

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the salvage value is shown as below:

Depreciation cost = (Cost of the asset-Salvage value)Estimated useful life of the asset

Declining-balance depreciation:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Annual depreciation = Purchase price × (2Useful life)

To determine: Use of FIFO instead of LIFO

b)

To determine

Use of 6-year life instead of 9-year life machinery.

c)

To determine

To determine: Use of depreciation method

Answer 6

Chapter 13, Problem 6Q

a)

To determine

First-in First-Out method (FIFO): In First-in-First-Out method, the costs of initial purchased items are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in First-Out method (LIFO): In Last-in-First-Out method, the costs of last purchased items are sold first. The value of the closing stock consists of the initial purchased items.

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the salvage value is shown as below:

Depreciation cost = (Cost of the asset-Salvage value)Estimated useful life of the asset

Declining-balance depreciation:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Annual depreciation = Purchase price × (2Useful life)

To determine: Use of FIFO instead of LIFO

Answer 7

Chapter 13, Problem 6Q

a)

To determine

First-in First-Out method (FIFO): In First-in-First-Out method, the costs of initial purchased items are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in First-Out method (LIFO): In Last-in-First-Out method, the costs of last purchased items are sold first. The value of the closing stock consists of the initial purchased items.

Straight-line Depreciation: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the salvage value is shown as below:

Depreciation cost = (Cost of the asset-Salvage value)Estimated useful life of the asset

Declining-balance depreciation:

It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

Annual depreciation = Purchase price × (2Useful life)

To determine: Use of FIFO instead of LIFO

Answer 8

b)

To determine

Use of 6-year life instead of 9-year life machinery.

Answer 9

b)

To determine

Use of 6-year life instead of 9-year life machinery.

Answer 10

c)

To determine

To determine: Use of depreciation method

Answer 11

c)

To determine

To determine: Use of depreciation method

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 13 - Prob. 1Q Ch. 13 - Prob. 2Q Ch. 13 - Prob. 3Q Ch. 13 - Prob. 4Q Ch. 13 - Prob. 5Q Ch. 13 - Prob. 6Q Ch. 13 - Prob. 7Q Ch. 13 - Prob. 8Q Ch. 13 - Prob. 9Q Ch. 13 - (a) Distinguish among the following bases of...

Solution Summary: The author explains the first-in-first-out method of depreciation, followed by the accelerated method, wherein the book value of the long-term asset is decreased by a fixed rate.

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Use of 6-year life instead of 9-year life machinery.

To determine: Use of depreciation method

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