SOLUTION:

Req. 1

Shelly’s Seashell Enterprises and Jeremy Feigenbaum Systems

Income Statements
For the Year Ended December 31, 20XX
ACCOUNT TITLE Shelly’s (FIFO and SL) Jeremy’s (LIFO and DDB)
Sales revenue $270,000 $270,000

Cost of goods sold 128,000* 149,000*

Gross profit 142,000 121,000

Operating expenses $80,700 $80,700

Depreciation expense
Shelly’s (SL):
($143,000 − $20,000) / 10 12,300
Jeremy’s (DDB):
($143,000 × 1/10 × 2) 28,600
Total expenses 93,000 109,300
Net income $ 49,000 $ 11,700

Req. 1

*Cost of goods sold: Units COGS

Shelly’s 10,000 × $4 = $ 40,000
(FIFO): 5,000 × 5 = 25,000
7,000 × 6 = 42,000
3,000 × 7 = 21,000
25,000 $128,000

*Cost of goods sold Units COGS

Jeremy’s 10,000 × $7 = $ 70,000
(LIFO): 7,000 × 6 = 42,000
5,000 × 5 = 25,000
3,000 × 4 = 12,000
25,000 $149,000
Req. 2

INVESTMENT LETTER

TO: Our Clients

FROM: Student Name

RE: Selecting Shelly’s Seashell Enterprises or Jeremy Feigenbaum Systems for a long-
term investment

In picking a speculation, we recommend you consider the accompanying variables:

Shelly and Jeremy are essentially indistinguishable organizations. The two organizations began
operations in the meantime and are occupied with comparable exchanges. Their fundamental
contrast lies in the bookkeeping strategies that they utilize.

1. Shelly's wage proclamation reports net wage of $49,000 contrasted with $11,700 for
Jeremy. At first glance Shelly's gives off an impression of being more beneficial. This distinction
does not recount the full story, be that as it may, in light of the fact that Shelley's uses the FIFO
technique to represent inventories and the straight-line system to represent deterioration. These
systems result in the most astounding conceivable reported wage. (proceeded with) Decision
Case

2. Jeremy reports lower net wage than Shelley in light of the fact that Jeremy utilizes the
LIFO system for inventories and the twofold declining-equalization strategy for devaluation.
These routines result in lower reported net wage.

There may be some timing contrasts included, i.e. Feigenbaum will have lower salary charge
liabilities in the close term, and in this manner higher income, however these distinctions even
out after some time.
Our decision is that in spite of clear contrasts in the wage proclamations of the two organizations,
when rectified for the impacts of distinctive bookkeeping routines, they both show level with
execution, and both speak to great venture opportunities.
Amazon
Req. 1
Amazon.com uses straight-line method of depreciation in which it depreciates its assets over their estimated
useful lives

Req. 2
Depreciation expense on fixed assets was $113 million for 2009.
Depreciation $ 113, 000, 000
Acc. Depreciation $ 113, 000, 000
Recording Depreciation Expense for 2005

Req. 3
Companies fixed asset purchases during 2009 were $204 million.
Fixed Asset $ 204, 000, 000
Cash $ 204, 000, 000
Purchase of Fixed Assets for Cash.