ACC 205 Week 3 Exercise Assignment Inventory

ACC 205 Week 3 Exercise Assignment Inventory

Week Three Exercise Assignment

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Inventory

  1. Specific identification method. Boston Galleries uses the specific identification method for inventory valuation. Inventory information for several oil paintings follows.
Painting Cost
1/2 Beginning inventory Woods $11,000
4/19 Purchase Sunset 21,800
6/7 Purchase Earth 31,200
12/16 Purchase Moon 4,000

Woods and Moon were sold during the year for a total of $35,000. Determine the firm’s

  1. cost of goods sold.
  2. gross profit.
  3. ending inventory.
  4. Inventory valuation methods: basic computations. The January beginning inven­tory of the White Company consisted of 300 units costing $40 each. During the first quarter, purchases were:

Date Quantity Cost

1/15 700 $45

1/31 1200 $48

2/12 800 $46

2/27 650 $51

Sales during the first quarter were.

Date Sold

1/19 500

2/2 600

2/13 500

2/28 100

The White Company uses a perpetual inventory system.

Using the White Company data, fill in the following chart to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods.

FIFO LIFO Weighted Average
Goods available for sale $ $ $
Ending inventory, March 31
Cost of goods sold
  1. Perpetual inventory system: journal entries. At the beginning of 20X3, Beehler Company implemented a computerized perpetual inventory system. The following transactions occurred:
  • Purchases on account: 500 units @$4 = $2,000
  • Sales on account: 300 units @ $5 = $1,500
  • Purchases on account: 600 units @$5 = $3,000
  • Sales on account: 300 units @ $5 = $1,500
  1. Prepare journal entries for the above purchases and sales.
  2. Calculate the balance in the firm’s Inventory account.
  3. Inventory valuation methods: computations and concepts. Wave Riders Surfboard Company began business on January 1 of the current year. Below are the transactions for the year

:

1/3: Purchase 100 boards @$125
3/17: Sold 50 boards @ $250
4/3: Purchase 200 boards @$135
5/17: Sold 75 boards @ $250
6/3: Purchase 100 boards @$145
1/3: Purchase 100 boards @$155
3/17: Sold 300 boards @ $250
1/3: Purchase 100 boards @$140

Wave Riders uses a perpetual inventory system.

Instructions

  1. Calculate cost of goods sold, ending inventory, and gross profit under each of the following inventory valuation methods:
  • First-in, first-out
  • Last-in, first-out
  • Weighted average
  1. Which of the three methods would be chosen if management’s goal is to

(1) produce an up-to-date inventory valuation on the balance sheet?

(2) approximate the physical flow of a sand and gravel dealer?

  1. Depreciation methods. Betsy Ross Enterprises purchased a delivery van for $30,000 in January 20X7. The van was estimated to have a service life of 5 years and a resid­ual value of $6,000. The company is planning to drive the van 20,000 miles annually. Compute depreciation expense for 20X8 by using each of the following methods:
  2. Units-of-output, assuming 17,000 miles were driven during 20X8
  3. Straight-line
  4. Double-declining-balance
  5. Depreciation computations. Alpha Alpha Alpha, a college fraternity, purchased a new heavy-duty washing machine on January 1, 20X3. The machine, which cost $1,000, had an estimated residual value of $100 and an estimated service life of 4 years (1,800 washing cycles). Calculate the following:
  6. The machine’s book value on December 31, 20X5, assuming use of the straight-line depreciation method
  7. Depreciation expense for 20X4, assuming use of the units-of-output depreciation method. Actual washing cycles in 20X4 totaled 500.
  8. Accumulated depreciation on December 31, 20X5, assuming use of the double-declining-balance depreciation method.
  9. Depreciation computations: change in estimate. Aussie Imports purchased a specialized piece of machinery for $50,000 on January 1, 20X3. At the time of acquisition, the machine was estimated to have a service life of 5 years (25,000 operating hours) and a residual value of $5,000. During the 5 years of operations (20X3 – 20X7), the machine was used for 5,100, 4,800, 3,200, 6,000, and 5,900 hours, respectively.

Instructions

  1. Compute depreciation for 20X3 – 20X7 by using the following methods: straight line, units of output, and double-declining-balance.
  2. On January 1, 20X5, management shortened the remaining service life of the machine to 20 months. Assuming use of the straight-line method, compute the company’s depreciation expense for 20X5.
  3. Briefly describe what you would have done differently in part (a) if Aussie Imports had paid $47,800 for the machinery rather than $50,000 In addition, assume that the company incurred $800 of freight charges $1,400 for machine setup and testing, and $300 for insurance during the first year of use.

 

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