Selected ledger account balances for Business Solutions follow

Question

For 3 Months Ended December 31, 2021

Office equipment: $8,000

Accumulated depreciation- Office equipment: $400

Computer equipment: $20,000

Accumulated depreciation- Computer equipment: $1,250

Total Revenue: $31,284

Total Assets: $83,460

For 3 Months Ended March 31, 2022

Office equipment: $8,000

Accumulated depreciation- Office equipment: $800

Computer equipment: $20,000

Accumulated depreciation- Computer equipment: $2,500

Total Revenue: $44,000

Total Assets: $120,268

1. Assume that Business Solutions does not acquire additional office equipment or computer equipment in 2022. Compute amounts for the year ended December 31, 2022, for Depreciation expense—Office equipment and for Depreciation expense—Computer equipment (assume use of the straight-line method).
2. Given the assumptions in part 1, what is the book value of both the office equipment and the computer equipment as of December 31, 2022?
3. Compute the three-month total asset turnover for Business Solutions as of March 31, 2022

ANSWERS:

1. Depreciation expense: office equipment: $1,600 Computer equipment: $5,000
2.  Book Value: Office equipment:? Computer equipment:?
3. Total asset turnover: ? times

Answer 1

(1) To find the annual straight-line depreciation expense, calculate the quarterly depreciation between December 31, 2021, and March 31, 2022 (3 months), then multiply by 4 quarters:

Office equipment

1. Quarterly depreciation: $800 - $400 = $400
2. 2022 annual depreciation expense: $400 * 4 = $1,600

Computer equipment

1. Quarterly depreciation: $2,500 - $1,250 = $1,250
2. 2022 annual depreciation expense: $1,250 * 4 = $5,000

(2) Book Value as 12/31/22

= Cost - Total Accumulated Depreciation

Office equipment

1. Total Accumulated Depreciation (Dec 31, 2022): $400 (ending 2021 balance) + $1,600 (2022 expense) = $2,000
2. Book value: $8,000 - 2,000 = $6,000

Computer equipment

1. Total Accumulated Depreciation (Dec 31, 2022): $1,250 (ending 2021 balance) + $5,000 (2022 expense) = $6.250
2. Book value: $20,000 - 6,250 = $13,750

(3) Three-Month Total Asset Turnover (as of March 31, 2022)

Total Asset Turnover = Total Revenue/Average Total Assets

1. Average Total Assets = ($83,460 + 120,268)/2 = $101,864
2. Total Asset Turnover = $44,000/101,864 = 0.43 times

Summary of Missing Values

1. Book Value — Office Equipment: $6,000
2. Book Value — Computer Equipment: $13,750
3. Total Asset Turnover: 0.43 times