Friday, July 21, 2006

"So, what's in store for the Tonics?"

----According to our in-house accountant, that would be raw materials, works-in-progress and finished goods. Incidentally, our works-in-progress inventory includes a song called "The CPI Song" that has lyrics like: "Let's go measuring prices with the CPI/ Consumer Pricing Index/ From the Bureau of Labor Statistics."

Here's a question for you: Steven purchased his $250 RadioShack keyboard in May 2001, with an estimated 4-year-life and a residual value of $50. What is the depreciation expense for 2001, if their year-end is Dec. 31? And what is the net book value of the keyboard on Dec. 31, 2001?

"What is the method of depreciation?"----Straight-line.

"Okay, depreciation expense is ($250-$50)/4 years = $50 per year. Multiply that by 8/12 and you get about $33. The net book value is $250-$33 = $217."----Very good.

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