ACC 545 r6 ABC Company - Income Statement and Balance Sheet Preparation

Resource:ABC Financial and Supplemental Data Excel^® spreadsheets, and footnotes from the Week 2 Learning Team assignment

Calculatethe deferred tax asset or liability of an error for the scenario provided.

Calculateinventory calculation average cost, first-in-first-out (FIFO), and last-in-first-out (LIFO). Record the calculated average cost in the financial statement.

Calculatethe straight-line depreciation.

Createan income statement using the results calculated above.

Createa balance sheet using the results calculated above. Insert your Learning Team's footnotes into the balance sheet and income statement. Identify in the footnotes the depreciation methods being used for the fixed assets. Also identify the footnotes the methodology used to determine deferred taxes.

Submitthe Income Statement and Balance Sheet in a Microsoft^® Excel^® spreadsheet that includes the required calculations.

(A) Depreciation Expense Using Straight-Line MethodABC Company has the following assets acquired on January 1, 2013 requiring depreciation calculation:

Asset

Cost
660
2,250

Land at a cost of $2,250,000
Machinery and Equipment with 20 year life at a cost
of 79,000.
Truck with a life of 7 years at a cost of $42,000

Life

79
42
3,031

Plant with 30 year life at a cost of $660,000

Annual Dep. Expense

20

30

7

-

(B) Inventory CalculationA physical inventory on December 31, 2013, shows 810 units on hand.
Calculate Cost of Goods Sold (COGS) using average cost.

Purchases
Beginning Inventory
January 5, 2013
March 25, 2013
June 8, 2013
September 15, 2013
December 15, 2013

(C ) Error Corrections(1) An error was discovered during 2013 relating to the understatement of depreciation expense in 2011
resulting in a Prior Period Adjustment of $1,505 before taxes.
(2) ABC Company changed its method of valuing inventory during 2013. The cumulative increase in income
from the change in inventory methods was $1,285 before taxes.

Units
800
950
950
745
625
505
4,575

Cost
14.39
13.46
12.81
13.65
13.25
14.97

Total
11,512
12,787
12,170
10,169
8,281
7,560
50,967

Purchase
Purchase
Purchase
Purchase
Purchase
Total Purchases