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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 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

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:

 Date Quantity Cost 15-Jan 700 \$45 31-Jan 1200 \$48 12-Feb 800 \$46 27-Feb 650 \$51 Sales during the first quarter were. Date Sold 19-Jan 500 2-Feb 600 13-Feb 500 28-Feb 100

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.