Unit 4 Discussion You are a patient. Look around your hospital room and describe
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Unit 4 Discussion You are a patient. Look around your hospital room and describe what you see. Discuss your answers to the following questions: What should be property that is depreciated and what should be considered inventory? Explain your answer. For items that are property and should be depreciated, what costs might have been incurred to put that item into service? How is it used? What method of depreciation should be used? Why? For items that are inventory, should the hospital use perpetual or periodic inventory? Explain the pros and cons of each.Explanation / Answer
The building of hospital, furniture, vehicles, generator etc.should be depreciated while other items such as laboratory items(sugical equpments), medicines and all other consumable items should be considered as part of inventory. This is because buildings, furniture, vehicles will form part of fixed assets and need to be depreciated while other items of daily use as mentioned need to be treated as part of inventory. The cost of acquisition and all other costs incurred for their subsequent addition/extension might have been incurred to put them into service. The method of dereciation to be employed should be straightline. It is so becasue it will be simple to calculate and avoid any complex accounting and results in fewer errors. Ideally a perpetual inventory system should be used by a hospital rather than periodic inventory. A perpetual inventory system allows one to know the balance in your inventory account at any point of time.Periodic inventory system on other hand is more useful for small businesses. The main drawback of periodic inventory is that it does not track inventory on daily basis. In an hospital due to huge number of inventory items it is advisable to have perpetual inventory system in place for daily tracking. Costs of setting a perpetual inventory system are more as compared to periodic inventory though.
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