Assignment Exercise 81: FIFO and LIFO Inventory
Study the FIFO and LIFO explanations in the chapter.
Required
 a1. Use the format in to compute the ending FIFO inventory and the cost of goods sold, assuming $90,000 in sales; beginning inventory 500 units @ $50; purchases of 400 units @ $50; 100 units @ $65; 400 units @ $80.
 a2. Also compute the cost of goods sold percentage of sales.
 b1. Use the format in to compute the ending LIFO inventory and the cost of goods sold, using same assumptions.
 b2. Also compute the cost of goods sold percentage of sales.
 c. Comment on the difference in outcomes.
Assignment Exercise 82: Inventory Turnover
Study the Calculating Inventory Turnover portion of the chapter closely, whereby the cost of goods sold divided by the average inventory equals the inventory turnover.
Required
Compute two inventory turnover calculations as follows:
 1. Use the LIFO information in the previous assignment to first compute the average inventory and then to compute the inventory turnover.
 2. Use the FIFO information in the previous assignment to first compute the average inventory and then to compute the inventory turnover.
Example 8A: Depreciation Concept
Assume that Metropolis Health System (MHS) purchased equipment for $200,000 cash on April 1 (the first day of its fiscal year). This equipment has an expected life of 10 years. The salvage value is 10% of cost. No equipment was traded in on this purchase.
Straightline depreciation is a method that charges an equal amount of depreciation for each year the asset is in service. In the case of this purchase, straightline depreciation would amount to $18,000 per year for 10 years. This amount is computed as follows:
 Step 1. Compute the cost net of salvage or tradein value: 200,000 less 10% salvage value or 20,000 equals 180,000.
 Step 2. Divide the resulting figure by the expected life (also known as estimated useful life): 180,000 divided by 10 equals 18,000 depreciation per year for 10 years.
Accelerated depreciation represents methods that are speeded up, or accelerated. In other words a greater amount of depreciation is taken earlier in the life of the asset. One example of accelerated depreciation is the doubledeclining balance method. Unlike straightline depreciation, tradein or salvage value is not taken into account until the end of the depreciation schedule. This method uses book value, which is the net amount remaining when cumulative previous depreciation is deducted from the assets cost. The computation is as follows:
 Step 1. Compute the straightline rate: 1 divided by 10 equals 10%.
 Step 2. Now double the rate (as in doubledeclining method): 10% times 2 equals 20%.
 Step 3. Compute the first years depreciation expense: 200,000 times 20% equals 40,000.
 Step 4. Compute the carryforward book value at the beginning of the second year: 200,000 book value beginning Year 1 less Year 1 depreciation of 40,000 equals book value at the beginning of the second year of 160,000.
 Step 5. Compute the second years depreciation expense: 160,000 times 20% equals 32,000.

Step 6.
Compute the carryforward book value at the
beginning of the third year: 160,000 book value beginning Year 2
less Year 2 depreciation of 32,000 equals book value at the
beginning of the third year of 128,000.
 Continue until the assets salvage or tradein value has been reached.
 Do not depreciate beyond the salvage or tradein value.
Practice Exercise 8I: Depreciation Concept
Assume that MHS purchased equipment for $600,000 cash on April 1 (the first day of its fiscal year). This equipment has an expected life of 10 years. The salvage value is 10% of cost. No equipment was traded in on this purchase.
Required
 1. Compute the straightline depreciation for this purchase.
 2. Compute the doubledeclining balance depreciation for this purchase.
Assignment Exercise 83: Depreciation Concept
Assume that MHS purchased two aIDitional pieces of equipment on April 1 (the first day of its fiscal year), as follows:
 1. The laboratory equipment cost $300,000 and has an expected life of = years. The salvage value is 5% of cost. No equipment was traded in on this purchase.
 2. The radiology equipment cost $800,000 and has an expected life of 7 years. The salvage value is 10% of cost. No equipment was traded in on this purchase.
Required
For both pieces of equipment:
 1. Compute the straightline depreciation.
 2. Compute the doubledeclining balance depreciation.
Example 8B: Depreciation
This example shows straightline depreciation computed at a fiveyear useful life with no salvage value. Straightline depreciation is the method commonly used for financing projections and funding proposals.
Depreciation Expense Computation: Straight Line
Five year useful life; no salvage value
Year #  Annual Depreciation  Remaining Balance 

Beginning Balance =  60,000  
1  12,000  48,000 
2  12,000  36,000 
3  12,000  24,000 
4  12,000  12,000 
5  12,000  0 
Example 8C: Depreciation
This example shows straightline depreciation computed at a fiveyear useful life with a remaining salvage value of $10,000. Note the difference in annual depreciation between Example 8B and Example 8C.
Depreciation Expense Computation: Straight Line
Five year useful life; $10,000 salvage value
Year #  Annual Depreciation  Remaining Balance 

Beginning Balance =  60,000  
1  10,000  50,000 
2  10,000  40,000 
3  10,000  30,000 
4  10,000  20,000 
5  10,000  10,000 
Example 8D: Depreciation
This example shows doubledeclining depreciation computed at a fiveyear useful life with no salvage value. As is often the case with a fiveyear life, the doubledeclining method is used for the first three years and the straightline method is used for the remaining two years. The doubledeclining method first computes what the straightline percentage would be. In this case 100% divided by five years equals 20%. The 20% is then doubled. In this case 20% times 2 equals 40%. Then the 40% is multiplied by the remaining balance to be depreciated. Thus 60,000 times 40% for year one equals 24,000 depreciation, with a remaining balance of 36,000. Then 36,000 times 40% for year two equals 14,400 depreciation, and 36,000 minus 14,400 equals 21,600 remaining balance, and so on.
Now note the difference in annual depreciation between Example 8B, using straightline for all five years, and Example 8D, using the combined doubledeclining and straightline methods.
Depreciation Expense Computation: DoubleDecliningBalance
Five year useful life; $10,000 salvage value
Year #  Annual Depreciation  Remaining Balance 

Beginning Balance =  60,000  
1  24,000  36,000 
2  14,400  21,600 
3  8,640  12,960 
4  6,480  6,480 
5  6,480  6,480 
*doubledeclining balance depreciation
**straightline depreciation for remaining two years (12,960 divided by 2 = 6,480/yr)
Practice Exercise 8II: Depreciation
Compute the straightline depreciation for each year for equipment with a cost of $50,000, a fiveyear useful life, and a $5,000 salvage value.
Assignment Exercise 84: Depreciation
Set up a purchase scenario of your own and compute the depreciation with and without salvage value.
Assignment Exercise 85: Depreciation Computation: UnitsofService
Study the Units of Service portion of the chapter closely.
Required

1.
Using the format in , compute units of
service depreciation using the following assumptions:
 Cost to be depreciated = $50,000
 Salvage value = zero
 Total units of service = 10,000
 Units of service per year: Year 1 = 2,200; Year 2 = 2,100; Year 3 = 2,300; Year 4 = 2,200; Year 5 = 200

2.
Using the same format, compute units of service
depreciation using adjusted assumptions as follows:
 Cost to be depreciated = $50,000
 Salvage value = $5,000
 Total units of service = 10,000
 Units of service per year: Year 1 = 2,200; Year 2 = 2,100; Year 3 = 2,300; Year 4 = 2,200; Year 5 = 200
CHAPTER 9
Example 9A
Review the chapter text about annualizing positions. In particular review , which contains the annualizing calculations.
Practice Exercise 9I: FTEs to Annualize Staffing
The office manager for a physicians group affiliated with Metropolis Health System (MHS) is working on her budget for next year. She wants to annualize her staffing plan. To do so she needs to convert her staffs net paid days worked to a factor. Their office is open and staffed seven days a week, per their agreement with two managed care plans.
The office manager has the MHS worksheet, which shows 9 holidays, 7 sick days, 15 vacation days, and 3 education days, equaling 34 paid days per year not worked. The physicians group allows 8 holidays, 5 sick days, and 1 education day. An employee must work one full year to earn 5 vacation days. An employee must have worked full time for three full years before earning 10 annual vacation days. Because the turnover is so high, nobody on staff has earned more than 5 vacation days.
Required
 1. Compute net paid days worked for a fulltime employee in the physicians group.
 2. Convert net paid days worked to a factor so the office manager can annualize her staffing plan.
Assignment Exercise 91: FTEs to Annualize Staffing
The Metropolis Health System managers are also working on their budgets for next year. Each manager must annualize his or her staffing plan, and thus must convert staff net paid days worked to a factor. Each manager has the MHS worksheet, which shows 9 holidays, 7 sick days, 15 vacation days, and 3 education days, equaling 34 paid days per year not worked.
The Laboratory is fully staffed 7 days per week and the 34 paid days per year not worked is applicable for the lab. The Medical Records department is also fully staffed 7 days per week. However, Medical Records is an outsourced department so the employee benefits are somewhat different. The Medical Records employees receive 9 holidays plus 21 personal leave days, which can be used for any purpose.
Required
 1. Compute net paid days worked for a fulltime employee in the Laboratory and in Medical Records.
 2. Convert net paid days worked to a factor for the Laboratory and for Medical Records so these MHS managers can annualize their staffing plans.
Example 9B
Review the chapter text about staffing requirements to fill a position. In particular review , which contains (at the bottom of the exhibit) the staffing calculations. Remember this method uses a basic work week as the standard.
Practice Exercise 9II: FTEs to Fill a Position
Metropolis Health System (MHS) uses a basic work week of 40 hours throughout the system. Thus, one fulltime employee works 40 hours per week. MHS also uses a standard 24hour scheduling system of three 8hour shifts. The Admissions manager needs to compute the staffing requirements to fill his departmental positions. He has more than one Admissions office staffed within the system. The West Admissions office typically has two Admissions officers on duty during the day shift, one Admissions officer on duty during the evening shift, and one Admissions officer on duty during the night shift. The day shift also has one clerical person on duty. Staffing is identical for all seven days of the week.
Required
 1. Set up a staffing requirements worksheet, using the format in .
 2. Compute the number of FTEs required to fill the Admissions officer position and the clerical position at the West Admissions office.
Assignment Exercise 92: FTEs to Fill a Position
Metropolis Health System (MHS) uses a basic work week of 40 hours throughout the system. Thus, one fulltime employee works 40 hours per week. MHS also uses a standard 24hour scheduling system of three 8hour shifts. The Director of Nursing needs to compute the staffing requirements to fill the Operating Room (OR) positions. Since MHS is a trauma center, the OR is staffed 24 hours a day, 7 days a week. At present, staffing is identical for all 7 days of the week, although the Director of Nursing is questioning the efficiency of this method.
The Operating Room department is staffed with two nursing supervisors on the day shift and one nursing supervisor apiece on the evening and night shifts. There are two technicians on the day shift, two technicians on the evening shift, and one technician on the night shift. There are three RNs on the day shift, two RNs on the evening shift, and one RN plus one LPN on the night shift. In aIDition, there is one aide plus one clerical worker on the day shift only.
Required
 1. Set up a staffing requirements worksheet, using the format in .
 2. Compute the number of FTEs required to fill the Operating Room staffing positions.
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