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This post addresses depreciation and internal control quest.

1.) Central Med Medical Clinic recently purchased an Electec model 1555 mobile CT Scanner for $225,000. Typically CMMC depreciates their medical equipment over a 3 year life, but they believe that the usage of the new mobile device and technology of the field will render the item obsolete within 1.5 years.

Which of the following depreciation methods would best allocate the cost of the CT scanner over it's estimated useful life?
Answer:
A. Straight Line method
B. Allowance method
C. Double Declining Balance method
D. Units of Production method

2.) Which of the following situations is an example of adequate internal controls?
Answer:
A. Fresh Florist's accountant was Mary Smith. After fifteen years of work, Mary was found to have been depositing small cash payments from clients into her own personal account when taking the daily bank deposit for the company. It's estimated that Mary had stolen up to $63,000 over the last two years alone. Mary's position was not insured against theft or loss by Fresh Florist.
B. The warehouse employees of Barnyard, Industries are to provide shipping documents and inventory confirmations to the purchasing department/accounting department in a timely manner for reconciling of sales orders. Currently the warehouse is submitting only about 88% of all shipping documents which are being received 35-40 days following shipment by the purchasing/accounting department.
C. Ted opens the mail and receives the check payments from clients, and counts the cash received through the mail unsupervised, before preparing the deposit slip and taking it to the bank the following date.
D. HiTimes Motorcycles is a small cycle shop in Destin Florida. Eddie Cruzin, the company accountant, prepares a full bank reconciliation following receipt of the monthly bank statements, that he receives online and confirms all differences between the company's cash account and the bank account within one business day. Additionally Javier, the business owner, signs off on the bank reconciliation immediately following his review of it's preparation.

Solution Preview

Double Declining Balance method- This will provide accelerated depreciation because the useful life is significantly shortened.

D. HiTimes Motorcycles is a small cycle shop ...

Solution Summary

The solution provides the correct answers with explanations for two multiple choice questions. The first question asks, Which of the following depreciation methods would best allocate the cost of the CT scanner over it's estimated useful life? The second question addressed asks, Which of the following situations is an example of adequate internal controls?

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