This week we learn about long-lived assets (Property Plant and Equipment – Chapter 9) and current liabilities and payroll (Chapter 11).
This week’s discussion questions are as follows:
- How is the cost of a lump-sum purchase allocated to the individual assets acquired? Provide a simple example of how the allocation would be performed if your company paid $1,000,000 cash in total for a restaurant (land, building, and equipment), and the appraised value was actually $1,200,000 for the 3 asset components $400,000, $500,000, and $300,000, respectively.
- Does the balance in the Accumulated Depreciation – Machinery account represent funds to replace the machinery when it wears out? If not, what does it represent?
- Assume you work for a company in sales and therefore are entitled to not only hourly pay, but commission and bonus as well. You work 40 hours in a payroll week. Calculate your gross pay for your company if you make $x per hour (you select your rate!), earn a 5% bonus (of gross pay), and earn 10% commission (of gross pay).
- Unfortunately, you do not get to keep all your Gross Pay. Assuming you have the following withholding deductions taken out of your pay, now calculate your Net Pay.
Withholding deductions:Employee income tax (20%)Employee OASDI tax (see book for how to calculate)Employee Medicare tax (1.45%)Employee health insurance75Employee contribution to United Way20Total withholdings: