Scenario:
As a Practice Manager for Dr. Smith and Dr. Brown, you are tasked with preparing a report that illustrates your knowledge of computing inventory and depreciation methods. After analyzing Dr. Smith and Dr. Brown’s Financial Statements Download Dr. Smith and Dr. Brown’s Financial Statements, and performing the necessary calculations, you will decide on the feasibility of purchasing the equipment based on your computations and analysis of the financial statements. In addition, you will explain the rationale for your choice and make a recommendation for the practice.
Download and complete the Inventory Concept and Depreciation Methods Template Download Inventory Concept and Depreciation Methods Template. You will need to ensure that your responses are thorough and written in your own words; give examples as required and list references in APA format in the space provided within the template. When completed, the document will be at least eight pages in length. With that said, the items below illustrate the required components to be completed. NOTE: Information to calculate inventory and depreciation is included in the Inventory Concept and Depreciation Methods Template Download Inventory Concept and Depreciation Methods Template.
Part 1: Inventory Concept and Calculations
- Discuss the inventory concept
- List an example of an inventory item and discuss how the item moves from inventory to COGS (Costs of Goods Sold). Include information on the meaning of COGS.
- Calculate the cost of ending inventory and COGS using the information provided within the template.
- FIFO
- LIFO
- WEIGHTED-AVERAGE
Part 2: Define the Five Methods for Computing Book Depreciation
- Define each of the following methods for computing book depreciation:
- Straight Line Depreciation Method
- Accelerated Book Depreciation: Sum of Years’ Digits (SYD) Method
- Accelerated Book Deprecation: Double Declining Balance (DDB) Method
- Accelerated Book Deprecation: 150% Declining Balance Method
Part 3: Calculating Depreciation
- Calculate depreciation for three of the depreciation methods identified in the template.
- Example of Straight Line Depreciation Method
- Example of Accelerated Book Depreciation: SYD Method
- Example of Accelerated Book Deprecation: DDB Method
Part 4: Analysis of Depreciation Methods
- Explain which method would be more feasible for healthcare organizations to use
- Hospital
- Physician practice
- Explain why it is important for a healthcare organization or physician practice to use a depreciation method.
Part 5: Recommendation
- What is the depreciation method you would recommend to Dr. Smith and Dr. Brown to purchase the fixed asset? Explain the rationale for your choice.
