ABC Corporation is a mid-sized manufacturing company that has recently decided to switch from a traditional inventory system to a Just-in-Time (JIT) inventory system. The company is concerned about the potential risks and benefits of this switch. They have traditionally kept large amounts of raw materials on hand to ensure smooth production. However, the management believes that JIT can help reduce carrying costs and improve efficiency. What are the key risks ABC Corporation should consider with the JIT system? How can the company mitigate these risks while maximizing the benefits of JIT? On December 31, 2023, Archer Daniels Midland Company (ADM) purchased new manufacturing equipment for $850,000, which had an estimated useful life of 10 years and a salvage value of $50,000. The company uses the straight-line depreciation method for all its equipment. During a review in June 2024, ADM's management discovered that the equipment's useful life should actually be 8 years, with a salvage value of $30,000. The equipment had already been depreciated for 6 months using the original estimates. Calculate the depreciation expense recorded from January to June 2024 (under the original estimate), determine the new annual depreciation amount using the revised estimates, and calculate the adjustment needed in June 2024 to correct the accumulated depreciation.
ABC Corporation is a mid-sized manufacturing company that has recently decided to switch from a traditional inventory system to a Just-in-Time (JIT) inventory system. The company is concerned about the potential risks and benefits of this switch. They have traditionally kept large amounts of raw materials on hand to ensure smooth production. However, the management believes that JIT can help reduce carrying costs and improve efficiency. What are the key risks ABC Corporation should consider with the JIT system? How can the company mitigate these risks while maximizing the benefits of JIT? On December 31, 2023, Archer Daniels Midland Company (ADM) purchased new manufacturing equipment for $850,000, which had an estimated useful life of 10 years and a salvage value of $50,000. The company uses the straight-line depreciation method for all its equipment. During a review in June 2024, ADM's management discovered that the equipment's useful life should actually be 8 years, with a salvage value of $30,000. The equipment had already been depreciated for 6 months using the original estimates. Calculate the depreciation expense recorded from January to June 2024 (under the original estimate), determine the new annual depreciation amount using the revised estimates, and calculate the adjustment needed in June 2024 to correct the accumulated depreciation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:ABC Corporation is a mid-sized manufacturing company that has recently
decided to switch from a traditional inventory system to a Just-in-Time (JIT)
inventory system. The company is concerned about the potential risks and
benefits of this switch. They have traditionally kept large amounts of raw
materials on hand to ensure smooth production. However, the management
believes that JIT can help reduce carrying costs and improve efficiency. What are
the key risks ABC Corporation should consider with the JIT system? How can
the company mitigate these risks while maximizing the benefits of JIT? On
December 31, 2023, Archer Daniels Midland Company (ADM) purchased new
manufacturing equipment for $850,000, which had an estimated useful life of 10
years and a salvage value of $50,000. The company uses the straight-line
depreciation method for all its equipment. During a review in June 2024, ADM's
management discovered that the equipment's useful life should actually be 8
years, with a salvage value of $30,000. The equipment had already been
depreciated for 6 months using the original estimates. Calculate the depreciation
expense recorded from January to June 2024 (under the original estimate),
determine the new annual depreciation amount using the revised estimates, and
calculate the adjustment needed in June 2024 to correct the accumulated
depreciation.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education