Glencoe Accounting

Unit 5: Accounting for Special Procedures

WebQuest Internet Project

The Magic of Matching

TEACHER NOTES

In this project, students will research and report on the issues related to asset management for Dell Computer Company. They will identify how Dell depreciates plant assets, how the company matches uncollectibles against revenues, and how the company handles inventory. Students will gain an understanding of how decisions regarding plant assets, accounts receivable, and inventory impact the success of the business. To complete their reports, students will research Dell’s basic business objectives and inventory strategies. They will also determine how effectively the company uses its assets to generate revenue. While Dell Computer has been used to illustrate these concepts, another publicly traded company may be researched and used in student reports instead.

The Guidance section of this WebQuest project contains questions that would be applicable for a whole-class discussion and for generating interdisciplinary connections. If you prefer, have each student research only one of the questions and add the information he or she finds to the final presentation of their WebQuest.

Several Web sites are included in the project to help students complete the WebQuest project. Encourage students to find additional sites and to share those sites with other students.

ANSWERS

  • Purchase entry: Debit Manufacturing Equipment $500,000; Credit Cash in Bank. Annual Depreciation Expense: ($500,000 - $15,000) ¸ 10 years = $48,500
  • If companies do not match expenses to the revenues they generate, purchases will be expensed in the period purchased. This would understate income in the year of the purchase, and overstate income in the years during which the asset begins to generate revenue.
  • A plant asset is one that is expected to produce benefits for more than one year and is purchased for use in operating activities. Examples include land, buildings, or store equipment. Current assets are usually consumed in one operating cycle, or one year. Examples include accounts receivable or inventory items sold within a short period of time.
  • $49,205,000 Í 0.2% = $98,410
  • In times of rising inventory prices, FIFO results in the highest gross profit on sales.

CHAPTER ANSWERS

Chapter 23

  • When calculating annual depreciation for a plant asset using the straight-line method, it is necessary to know the purchase amount, the disposal value of the asset, and the asset’s useful life.

Chapter 24

  • The allowance method of accounting for uncollectible expense requires an adjustment at the end of each period. The two accounts affected are Uncollectible Accounts Expense and Allowance for Uncollectible Accounts. When netted against the gross total of accounts receivable, the allowance account balance gives the true value of the receivables on the balance sheet.

Chapter 25

  • When the LIFO costing method is used, the first items into inventory are used to assign a cost to the inventory. This is because LIFO assumes that the last items purchased are the first to be sold, leaving the first items purchased still in inventory.
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