Question

Selected ledger account balances for business solutions follow. for three months ended december 31, 2021 for three months ended march 31, 2022 office equipment 8,000 8,000 accumulated depreciation–office equipment 400 800 computer equipment 20,000 20,000 accumulated depreciation–computer equipment 1,250 2,500 total revenue 31,284 44,000 total assets 83,460 120,268 required: assume that business solutions does not acquire additional office equipment or computer equipment in 2022. compute amounts for the year ended december 31, 2022, for depreciation expense–office equipment and for depreciation expense–computer equipment (assume use of the straight-line method). given the assumptions in part 1, what is the book value of both the office equipment and the computer equipment as of december 31, 2022? compute the three-month total asset turnover for business solutions as of march 31, 2022?

Answer 1

The depreciation expense for office equipment and computer equipment can be calculated using the straight-line method. The book value of the equipment can be determined by subtracting the accumulated depreciation from the initial cost. The three-month total asset turnover can be calculated by dividing total revenue by average total assets.

Step-by-step explanation:

To calculate the depreciation expense for office equipment and computer equipment using the straight-line method, we need to find the annual depreciation rate. This can be calculated by subtracting the accumulated depreciation at the end of the year from the accumulated depreciation at the beginning of the year, and then dividing it by the initial cost of the equipment:

Depreciation Expense = (Accumulated Depreciation at the end of the year - Accumulated Depreciation at the beginning of the year) / Cost of the equipment

Using the given values, the depreciation expense for office equipment is ($800 - $400) / $8,000 = $0.05 per month. For computer equipment, it is ($2,500 - $1,250) / $20,000 = $0.0625 per month.

The book value of office equipment as of December 31, 2022, can be calculated by subtracting the accumulated depreciation at the end of 2022 from the initial cost of the equipment: $8,000 - $800 = $7,200. The book value of computer equipment is $20,000 - $2,500 = $17,500.

The three-month total asset turnover is calculated by dividing the total revenue for the three months ending March 31, 2022, by the average total assets for the same period:

Total Asset Turnover = Total Revenue / Average Total Assets

Using the given values, the total asset turnover is $44,000 / (($83,460 + $120,268) / 2) = 0.342.