Second case

#1:CRV Corp manufactures small plastic fittings for plumbingapplications. They have accepted a new contract to provide a widerange of custom plastic fittings. To service the contract, CRVpurchases a new, highly complex plastic injection molding machine.CRV’s fiscal year coincides with the calendar year. The machine isinstalled and operational as of July 1, 2015.

CRV provides the following data:

1. Purchase price of machine: $275,000

2. Shipping and installation: $ 45,000

3. Training costs: $ 15,000

4. Useful life: 5 years

5. Estimated salvage: $ 12,500

Required:

1. Prepare a depreciation schedule showing Net Book value(beginning and ending), depreciation expense, and accumulateddepreciation for the asset. Hint: pay attention to dates ofacquisition and fiscal year.

Prepare one schedule for each method:

a. Straight-line

b. Double-declining balance

Excel Format

Year

NBV beg

Factor

Depreciation expense

Accumulated depreciation

NBV ending

2. Qualitative analysis:

CRV Company receives an offer of $159,000 for the machine inDecember, 2018.

a. What factors should CRV Company consider in determiningwhether to sell or keep the machine?

b. Evaluate the implication on taxable income under eachdeprecation method assuming CRV sells the machine at the end ofDecember 2018.

Use $ values to support your support your written narrative.

#2: Inventory valuation:

The operations manager for CRV has asked you to provide aquantitative and qualitative inventory analysis using a sample ofpurchases as shown below.

The manager has asked for the following:

			Units	Unit cost	Total cost
Beginning inventory			1,750	$3.95	$6,913
Purchases:	a		2,100	$3.75	$7,875
	b		1,600	$4.10	$6,560
	c		850	$4.20	$3,570
Sales			4,100 units sold

1. Calculate the $ ending inventory and $ cost of goods soldusing each of the following inventory methods:

a. FIFO

b. LIFO

c. Average cost

2. Which inventory method would you recommend for reporting forincome tax purposes to minimize taxable income? Why?

3. The company is operating in an inflationary environment.Which method should the company use to maximize inventoryvaluation? Why?

4. Looking at the purchasing volume versus demand, what guidancewould you offer to the operations manager regarding inventorymanagement and cash flow?

All calculations must be indicated via Excel formulas.