Week Three Exercise Assignment
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 | $21,000 |
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
a. cost of goods sold.
b. gross profit.
c. ending inventory.
2. Inventory valuation methods: basic computations. The January beginning ...view middle of the document...
a. Duplicate the journal entries that would have appeared on the computer printout under FIFO & LIFO
b. Calculate the balance in the firm’s Inventory account under each method.
c. Briefly explain the absence of the Purchases account to the company president.
4. Inventory valuation methods: computations and concepts.
Wild Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:
Date | Quantity | Unit Cost | Total Cost |
1/3 | 100 | $125 | $12,500 |
4/3 | 200 | $135 | $27,000 |
6/3 | 100 | $145 | $14,500 |
7/3 | 100 | $155 | $15,500 |
Total | 500 | | $69,500 |
Wild Riders sold 400 boards at $250 per board on the dates listed below. The company uses a perpetual inventory system.
Date | Quantity Sold | Unit Price | Total Sales |
3/17 | 50 | $250 | $12,500 |
5/17 | 75 | $250 | $18,750 |
8/10 | 275 | $250 | $68,750 |
Total | 400 | | $100,000 |
a. 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
b. 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) show the lowest net income for tax purposes?
5. Depreciation methods. Mike Davis Enterprises purchased a delivery van for $40,000 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:
a. Units-of-output, assuming 17,000 miles were driven...