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ACC205 Week 3 7Qs

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Exercise 1
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 PurchaseSunset 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

Exercise 2
The January beginning inventory of the White Company consisted of 300 units costing $40 each. During the first quarter, the company purchases were:


DateQuantityCost
15-Jan700$45
31-Jan1200$48
12-Feb800$46
27-Feb650$51
Sales during the first quarter were.
DateSold
19-Jan500
2-Feb600
13-Feb500
28-Feb100


The White Company uses a perpetual inventory system.

Exercise 3

At the beginning of 20X3, Beehler Company implemented a computerized perpetual inventory system. The first transactions that occurred during 20X3 following.
· 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

a. Prepare journal entries for the above purchases and sales.
b. Calculate the balance in the firm’s Inventory account

Exercise 4
Wave Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows:


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

Exercise 5
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:

a. Units-of-output, assuming 17,000 miles were driven during 20X8
b. Straight-line
c. Double-declining-balance

Exercise 6
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:
a. The machine’s book value on December 31, 20X5, assuming use of the straight-line depreciation method
b. Depreciation expense for 20X4, assuming use of the units-of-output depreciation method. Actual washing cycles in 20X4 totaled 500.
c. Accumulated depreciation on December 31, 20X5, assuming use of the double-declining-balance depreciation method.

Exercise 7
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
a. Compute depreciation for 20X3 - 20X7 by using the following methods: straight line, units of output, and double-declining-balance.
b. 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.
c. 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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