ACC 422- Final Exam - Presented below is information related to Rembrandt Inc.'s inventory.

ACC 422- Final Exam

 

Presented below is information related to Rembrandt Inc.'s inventory.

(per unit)	Skis		Boots		Parkas
Historical cost	$255.93		$142.78		$71.39
Selling price	292.30		195.32		99.34
Cost to distribute	25.59		10.78		3.37
Current replacement cost	273.44		141.44		68.70
Normal profit margin	43.10		39.06		28.62

Determine the following:

 

(a) the two limits to market value (e.g., the ceiling and the floor) that should be used in the lower of cost or market computation for skis; (Round answers to 2 decimal places, e.g. 20.25.)

Ceiling $ 

Floor $

 

(b) the cost amount that should be used in the lower of cost or market comparison of boots; (Round answer to 2 decimal places, e.g. 20.25.)

Cost amount$

 

(c) the market amount that should be used to value parkas on the basis of the lower of cost or market. (Round answer to 2 decimal places, e.g. 20.25.)

Market amount $

 

3. Matlock Company uses a perpetual inventory system. Its beginning inventory consists of 55 units that cost $33 each. During June, the company purchased 166 units at $33 each, returned 7 units for credit, and sold 138 units at $55 each. Journalize the June transactions.

Description/Account Choose One for Each	Debit	Credit
Sales,Inventory,Accounts receivable,Accounts payable,Cost of goods sold
Cost of goods sold,Accounts payable,Inventory,Accounts receivable,Sales
(To record inventory purchased.)
Inventory,Accounts receivable,Sales,Cost of goods sold,Accounts payable
Accounts receivable,Sales,Cost of goods sold,Inventory,Accounts payable
(To record inventory returned.)
Sales,Accounts receivable,Inventory,Cost of goods sold,Accounts payable
Cost of goods sold,Sales,Inventory,Accounts payable,Accounts receivable
(To record inventory sold.)
Sales,Accounts payable,Inventory,Cost of goods sold,Accounts receivable
Accounts receivable,Sales,Inventory,Cost of goods soldAccounts payable
(To record cost of goods sold.)

 

Question 4

Amsterdam Company uses a periodic inventory system. For April, when the company sold 700 units, the following information is available.

	Units	Unit Cost	Total Cost
April 1 inventory	250	$17	$4,250
April 15 purchase	400	20	8,000
April 23 purchase	350	22	7,700
	1,000		$19,950

Compute the April 30 inventory and the April cost of goods sold using the average cost method. (Round computations for cost per unit to 2 decimal places, e.g. 10.25 and answers to 0 decimal places, e.g. 2,250.)

Inventory	$
Cost of goods sold	$

 

Question 5

Amsterdam Company uses a periodic inventory system. For April, when the company sold 600 units, the following information is available.

	Units	Unit Cost	Total Cost
April 1 inventory	250	$15	$3,750
April 15 purchase	400	18	7,200
April 23 purchase	350	20	7,000
	1,000		$17,950

Compute the April 30 inventory and the April cost of goods sold using the FIFO method.

Inventory $

Cost of goods sold $

 

Question 6

(FIFO, LIFO, Average Cost Inventory)

Esplanade Company was formed on December 1, 2011. The following information is available from Esplanade's inventory records for Product BAP.

	Units	Unit Cost
January 1, 2012 (beginning inventory)	792	$8.00
Purchases:
January 5, 2012	1,584	9.00
January 25, 2012	1,716	10.00
February 16, 2012	1,056	11.00
March 26, 2012	792	12.00

A physical inventory on March 31, 2012, shows 2,112 units on hand.

Prepare schedules to compute the ending inventory at March 31, 2012, under each of the following inventory methods. Assume Esplanade Company uses the periodic inventory method.

 

(a) FIFO

 

ESPLANADE COMPANY

Computation of Inventory for Product BAP

BAP under FIFO Inventory Method

March 31, 2012

	Units	Unit Cost	Total Cost
March 26, 2012		$	$
February 16, 2012
January 25, 2012
March 31, 2012, inventory			$

 

(b) LIFO

ESPLANADE COMPANY

Computation of Inventory for Product BAP

BAP under LIFO Inventory Method

March 31, 2012

	Units	Unit Cost	Total Cost
Beginning inventory		$	$
January 5, 2012
March 31, 2012, inventory			$

(c) Weighted average (Round weighted average cost to 2 decimal places, e.g. 2.25 and use this rounded amount for future calculations. Round the inventory on March to 0 decimal places, e.g. 1,250.)

 

ESPLANADE COMPANY

Computation of Inventory for Product BAP

BAP under Weighted Average Inventory Method

March 31, 2012

		Units		Unit Cost	Total Cost
Beginning inventory				$	$
January 5, 2012
January 25, 2012
February 16, 2012
March 26, 2012
					$
Weighted Average cost	$
March 31, 2012, inventory	$

 

Question 7

Floyd Corporation has the following four items in its ending inventory.

Item	Cost	Replacement Cost	Net Realizable Value (NRV)	NRV Less Normal Profit Margin
Jokers	$2,552	$2,616	$2,680	$2,042
Penguins	6,380	6,508	6,316	5,232
Riddlers	5,614	5,806	5,902	4,721
Scarecrows	4,083	3,815	4,887	3,917

Determine the final lower of cost or market inventory value for each item.

Jokers $

Penguins $

Riddlers $

Scarecrows $

 

Question 8

Kumar Inc. uses a perpetual inventory system. At January 1, 2013, inventory was $313,724 at both cost and market value. At December 31, 2013, the inventory was $419,276 at cost and $394,354 at market value. Prepare the necessary December 31 entry under:

 

a) the cost of goods sold method

Description/Account  Choose One	Debit	Credit
Loss due to market decline of inventory, Inventory Allowance to reduce inventory to market, Cash, Sales, Gain due to market increase of inventory, Cost of goods sold
Sales, Loss due to market decline of inventory, Cost of goods sold, Allowance to reduce inventory to market, Inventory, Cash, Gain due to market increase of inventory

 

(b) the loss method

Description/Account  Choose One	Debit	Credit
Cost of goods sold, Sales Allowance to reduce inventory to market, Gain due to market increase of inventory, Cash, Loss due to market decline of inventory, Inventory
Cost of goods sold, Sales, Gain due to market increase of inventory, Cash, Allowance to reduce inventory to market, Loss due to market decline of inventory, Inventory

Question 9

Boyne Inc. had beginning inventory of $16,080 at cost and $26,800 at retail. Net purchases were $160,800 at cost and $227,800 at retail. Net markups were $13,400; net markdowns were $9,380; and sales were $210,380. Compute ending inventory at cost using the conventional retail method. (Round computation for cost-to-retail ratio percentage and answer to 0 decimal places, e.g. 25,250.)

Ending inventory

$

 

Question 10

(Gross Profit Method)

Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

	Inventory, May 1	$184,000
	Purchases (gross)	736,000
	Freight-in	34,500
	Sales	1,150,000
	Sales returns	80,500
	Purchase discounts	13,800

 

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales

Inventory

$

 

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.

Inventory

$

Question 11

Previn Brothers Inc. purchased land at a price of $29,210. Closing costs were $3,290. An old building was removed at a cost of $15,220. What amount should be recorded as the cost of the land?

 

Question 12

Garcia Corporation purchased a truck by issuing an $96,000, 4-year, zero-interest-bearing note to Equinox Inc. The market rate of interest for obligations of this nature is 10%. Prepare the journal entry to record the purchase of this truck. (Round answers to 0 decimal places, e.g. 15,510. List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2. Hint: Use tables in text.)

Description/Account  Choose One	Debit	Credit
Notes payable, Truck, Discount on notes payable, Depreciation expense, Cash, Notes receivable
Notes payable, Discount on notes payable, Depreciation expense, Cash, Notes receivable, Truck
Discount on notes payable, Cash, Notes payable, Truck, Notes receivable, Depreciation expense

Question 13

Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $412,650. The estimated fair values of the assets are land $78,600, building $288,200, and equipment $104,800. At what amounts should each of the three assets be recorded? (Note: Do not round the computation of the % of total.)

	Recorded Amount
Land	$
Building	$
Equipment	$

Question 14

Fielder Company obtained land by issuing 2,000 shares of its $13 par value common stock. The land was recently appraised at $110,500. The common stock is actively traded at $53 per share. Prepare the journal entry to record the acquisition of the land. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Description/Account  Choose One	Debit	Credit
Additional paid-in capital, Common stock, Cash, Land, Paid-in capital in excess of par
Common stock, Additional paid-in capital, Paid-in capital in excess of par, Cash, Land
Paid-in capital in excess of par, Land, Additional paid-in capital, Common stock, Cash

Question 15

Navajo Corporation traded a used truck (cost $26,600, accumulated depreciation $23,940) for a small computer worth $4,921. Navajo also paid $1,330 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Description/Account  Choose One	Debit	Credit
Accumulated depreciation,Gain on disposal of truck,Cash,Computer,Truck
Truck,Computer,Cash,Gain on disposal of truck,Accumulated depreciation
Computer,Cash,Truck,Gain on disposal of truck,Accumulated depreciation
Computer,Cash,Truck,Gain on disposal of truck,Accumulated depreciation
Computer,Truck,Gain on disposal of truck,Accumulated depreciation,Cash

Question 16

Mehta Company traded a used welding machine (cost $9,990, accumulated depreciation $3,330) for office equipment with an estimated fair value of $5,550. Mehta also paid $3,330 cash in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Description/Account  Choose One	Debit	Credit
Office equipment,Cash,Accumulated depreciation,Depreciation expense,Loss on disposal of machine,Gain on disposal of machine,Machine
Loss on disposal of machine,Accumulated depreciation,Cash,Gain on disposal of machine,Depreciation expense,Office equipment,Machine
Gain on disposal of machine,Accumulated depreciation,Machine,Depreciation expense,Loss on disposal of machine,Office equipment,Cash
Gain on disposal of machine,Depreciation expense,Accumulated depreciation,Machine,Office equipment,Loss on disposal of machine,Cash
Cash,Office equipment,Gain on disposal of machine,Machine,Loss on disposal of machine,Accumulated depreciation,Depreciation expense

Question 17Depreciation is normally computed on the basis of the nearest

full month and to the nearest dollar.

day and to the nearest dollar.

day and to the nearest cent.

full month and to the nearest cent.

 

Question 18

Fernandez Corporation purchased a truck at the beginning of 2012 for $58,380. The truck is estimated to have a salvage value of $2,780 and a useful life of 222,400 miles. It was driven 31,970 miles in 2012 and 43,090 miles in 2013. Compute depreciation expense for 2012 and 2013.(Round answers to 0 decimal places, i.e. 2,250.)

2012 $

2013 $

 

Question 19

Lockhard Company purchased machinery on January 1, 2012, for $75,600. The machinery is estimated to have a salvage value of $7,560 after a useful life of 8 years.

(a) Compute 2012 depreciation expense using the double-declining balance method.

$

(b) Compute 2012 depreciation expense using the double-declining balance method assuming the machinery was purchased on October 1, 2012.(Round answer to 0 decimal places, i.e. 2,250.)

$

 

Question 20

Jurassic Company owns machinery that cost $1,270,800 and has accumulated depreciation of $508,320. The expected future net cash flows from the use of the asset are expected to be $706,000. The fair value of the equipment is $564,800. Prepare the journal entry, if any, to record the impairment loss.

Description/Account  Choose One	Debit	Credit
Cash,Loss on impairment,Machinery,Accumulated depreciation,Depreciation expense
Loss on impairment,Depreciation expense,Machinery,Cash,Accumulated depreciation

Question 21

Everly Corporation acquires a coal mine at a cost of $515,200. Intangible development costs total $128,800. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $103,040), after which it can be sold for $206,080. Everly estimates that 5,152 tons of coal can be extracted. If 902 tons are extracted the first year, prepare the journal entry to record depletion.

Description/Account  Choose One	Debit	Credit
Accumulated depletion,Development costs,Restoration costs,Inventory
Restoration costs,Inventory,Development costs,Accumulated depletion

Question 22

Francis Corporation purchased an asset at a cost of $68,400 on March 1, 2012. The asset has a useful life of 8 years and a salvage value of $6,840. For tax purposes, the MACRS class life is 5 years. Compute tax depreciation for each year 2012–2017. (Round answers to 0 decimal places.)

2012 $

2013 $

2014 $

2015 $

2016 $

2017 $

 

Question 23

Celine Dion Corporation purchases a patent from Salmon Company on January 1, 2012, for $53,220. The patent has a remaining legal life of 16 years. Celine Dion feels the patent will be useful for 10 years. Prepare Celine Dion's journal entries to record the purchase of the patent and 2012 amortization.

Account/Description  Choose One	Debit	Credit
Accounts payable, Accumulated amortization, Accounts receivable, Cash, Patent amortization expense, Patents
Accumulated amortization, Accounts payable, Accounts receivable, Patent amortization expense, Cash, Patents
(To record purchase of patent.)
Patent amortization expense, Accumulated amortization, Cash,Patents, Accounts receivable, Accounts payable
Patent amortization expense, Cash, Accumulated amortization, Accounts receivable, Accounts payable, Patents
(To record amortization.)

 

Question 24

Karen Austin Corporation has capitalized software costs of $757,200, and sales of this product the first year totaled $415,380. Karen Austin anticipates earning $969,220 in additional future revenues from this product, which is estimated to have an economic life of 4 years. Compute the amount of software cost amortization for the first year.

(a) Compute the amount of software cost amortization for the first year using the percent of revenue approach. $

(b) Compute the amount of software cost amortization for the first year using the straight-line approach. $

 

Question 25

Jeff Beck is a farmer who owns land which borders on the right-of-way of the Northern Railroad. On August 10, 2012, due to the admitted negligence of the Railroad, hay on the farm was set on fire and burned. Beck had had a dispute with the Railroad for several years concerning the ownership of a small parcel of land. The representative of the Railroad has offered to assign any rights which the Railroad may have in the land to Beck in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Beck appears inclined to accept the Railroad's offer. The Railroad's 2012 financial statements should include the following related to the incident:

 

disclosure in note form only.

recognition of a loss and creation of a liability for the value of the land.

recognition of a loss only.

creation of a liability only.

 

Question 26

Roley Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. On July 1, Roley purchased $62,000 of inventory, terms 2/10, n/30, FOB shipping point. Roley paid freight costs of $1,480. On July 3, Roley returned damaged goods and received credit of $6,200. On July 10, Roley paid for the goods. Prepare all necessary journal entries for Roley. (For multiple debit/credit entries, list amounts from largest to smallest, e.g. 10, 8, 6.)

Date	Description/Account  Choose One	Debit	Credit
July 1	Accounts payable,Purchase discounts,Cash,Purchases,Purchase returns and allowances
	Purchase returns and allowances,Accounts payable,Cash,Purchase discounts,Purchases
	Freight-in
	Purchases,Purchase returns and allowances,Purchase discounts,Cash,Accounts payable
July 3	Purchase returns and allowances,Accounts payable,Purchases,Cash,Purchase discounts
	Accounts payable,Purchases,Purchase returns and allowances,Cash,Purchase discounts
July 10	Purchases,Cash,Accounts payable,Purchase discounts,Purchase returns and allowances
	Purchase returns and allowances,Purchase discounts,Cash,Purchases,Accounts payable
	Cash,Purchases,Accounts payable,Purchase returns and allowances,Purchase discounts

Question 27

Takemoto Corporation borrowed $115,800 on November 1, 2012, by signing a $118,406, 3-month, zero-interest-bearing note. Prepare Takemoto's November 1, 2012, entry; the December 31, 2012, annual adjusting entry; and the February 1, 2013, entry. (For multiple debit/credit en tries, list amounts from largest to smallest, e.g. 10, 8, 6. Round all answers to 0 decimal places, e.g. 11,150.)

Date	Description/Account  Choose One	Debit	Credit
11/1/12	Notes receivable,Discount on notes payable,Cash,Interest payable,Notes payable,Interest expense
	Discount on notes payable,Cash,Notes payable,Interest expense,Notes receivable,Interest payable
	Discount on notes payable,Interest expense,Notes receivable,Interest payable,Notes payable,Cash
12/31/12	Cash,Notes payable,Discount on notes payable,Interest expense,Notes receivable,Interest payable
	Discount on notes payable,Interest payable,Notes receivable,Notes payable,Interest expense,Cash
2/1/13	Interest payable,Notes payable,Interest expense,Cash,Discount on notes payable,Notes receivable
	Notes payable,Interest expense,Interest payable,Notes receivable,Discount on notes payable,Cash
	Interest expense,Cash,Discount on notes payable,Interest payable,Notes receivable,Notes payable
	Cash

 Question 28

Whiteside Corporation issues $648,000 of 9% bonds, due in 11 years, with interest payable semiannually. At the time of issue, the annual market rate for such bonds is 10%. Compute the issue price of the bonds. (Use the present value tables in the text. Round your answer to zero decimal places, e.g. 2,510.)

$

 

Question 29

Indiana Jones Company enters into a 7-year lease of equipment on January 1, 2012, which requires 7 annual payments of $38,300 each, beginning January 1, 2012. In addition, the lessee guarantees a residual value of $20,810 at lease-end. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor,  collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the carrying amount of the machinery is $205,180. Prepare Lost Ark's January 1, 2012, journal entries.

Description  Choose One	Debit	Credit
Machinery,Cash,Rent Expense,Lease Liability,Leased Machinery Under Capital Leases,Interest Payable,Interest Expense,Lease Receivable	$
Lease Receivable,Cash,Interest Payable,Lease Liability,Leased Machinery Under Capital, Leases,Rent Expense,Interest Expense,Machinery		$
(To record the lease)
Lease Receivable,Rent Expense,Lease LiabilityMachinery,Interest Payable,Interest Expense,Cash,Leased Machinery Under Capital, Leases	$
Lease Receivable,Interest Expense,Lease Liability,Machinery,Cash,Leased Machinery Under Capital Leases,Rent Expense,Interest Payable		$
(To record first lease payment)

Question 30

On January 1, 2012, Irwin Animation sold a truck to Peete Finance for $25,800 and immediately leased it back. The truck was carried on Irwin's books at $19,300. The term of the lease is 5 years, and title transfers to Irwin at lease-end. The lease requires five equal rental payments of $7,515 at the end of each year. The appropriate rate of interest is 14%, and the truck has a useful life of 5 years with no salvage value. Prepare Irwin's 2012 journal entries. (Round your answer to the nearest dollar eg 58,591.  For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Date	Description  Choose One	Debit	Credit
Jan. 1	Unearned Profit on Sale-Leaseback,Truck,Leased Equipment,Accumulated Depreciation,Interest Expense,Cash,Lease Liability,Depreciation Expense	$
	Leased Equipment,Unearned Profit on Sale-Leaseback,Lease Liability,Depreciation Expense,Interest Expense,Truck,Cash,Accumulated Depreciation		$
	Interest Expense,Leased Equipment,Depreciation Expense,Unearned Profit on Sale-Leaseback,Truck,Accumulated Depreciation,Cash,Lease Liability		$
	(To record the sale )
Jan. 1	Leased Equipment,Unearned Profit on Sale-Leaseback,Cash,Accumulated Depreciation,Truck,Depreciation Expense,Lease Liability,Interest Expense	$
	Cash,Interest Expense,Unearned Profit on Sale-Leaseback,Leased Equipment,Truck,Depreciation Expense,Accumulated Depreciation,Lease Liability		$
	(To record the leaseback)
Dec. 31	Depreciation Expense,Lease Liability,Unearned Profit on Sale-Leaseback,Cash,Truck,Accumulated Depreciation,Leased Equipment,Interest Expense	$
	Leased Equipment,Interest Expense,Cash,Truck,Lease Liability,Accumulated Depreciation,Depreciation Expense,Unearned Profit on Sale-Leaseback		$
	(To record depreciation)
Dec. 31	Accumulated Depreciation,Truck,Leased Equipment,Unearned Profit on Sale-Leaseback,Cash,Lease Liability,Depreciation Expense,Interest Expense,	$
	Interest Expense,Unearned Profit on Sale-Leaseback,Cash,Leased Equipment,Depreciation Expense,Accumulated Depreciation,Truck,Lease Liability		$
Dec. 31	Lease Liability,Unearned Profit on Sale-Leaseback,Leased Equipment,Cash,Accumulated Depreciation,Depreciation Expense,Truck,Interest Expense	$
	Depreciation Expense,Cash,Accumulated Depreciation,Truck,Lease Liability,Unearned Profit on Sale-Leaseback,Interest Expense,Leased Equipment	$
	Lease Liability,Depreciation Expense,Interest Expense,Leased Equipment,Unearned Profit on Sale-Leaseback,Accumulated Depreciation,Cash,Truck		$
	(To record first lease payment)

TUTORIAL PREVIEW

(a)

Question 6

(FIFO, LIFO, Average Cost Inventory)
Esplanade Company was formed on December 1, 2011. The following information is available from Esplanade's inventory records for Product BAP.

(a) FIFO

ESPLANADE COMPANY
Computation of Inventory for Product
BAP Under FIFO Inventory Method
March 31, 2012
	Units		Unit Cost		Total Cost
March 26, 2012	792		$12.00		$  9,504
February 16, 2012	1,056		11.00		11,616
January 25, 2012 (portion)	264		10.00		2,640

 

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