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week2 Exercises and Problems E9-3 E9-12 E9-19 E10-2 E10-23
9-3 Michael Bolton Company follows the practice of pricing its inventory at
the lower-of-cost-or-market, on an individual-item basis.
Item No. Quantity Cost per Unit Cost to Replace Estimated
Selling Price Cost of Completion and Disposal Normal Profit
1320 1,200 $3.20 $3.00 $4.50 $0.35 $1.25
1333 900 2.70 2.30 3.50 0.50 0.50
1426 800 4.50 3.70 5.00 0.40 1.00
1437 1,000 3.60 3.10 3.20 0.25 0.90
1510 700 2.25 2.00 3.25 0.80 0.60
1522 500 3.00 2.70 3.80 0.40 0.50
1573 3,000 1.80 1.60 2.50 0.75 0.50
1626 1,000 4.70 5.20 6.00 0.50 1.00
From the
information above, determine the amount of Bolton Company inventory.
The amount of
Bolton Company’s inventory $
E9-12 Mark Price 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 $ 160,000
Purchases
(gross) 640,000
Freight-in
30,000
Sales revenue
1,000,000
Sales returns
70,000
Purchase
discounts 12,000
(a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales. The estimated inventory at May 31 $
(b) Compute the estimated inventory at May 31, assuming that the gross
profit is 30% of cost. (Round percentage of sales
to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g.
6,225.)
The estimated
inventory at May 31 $
E9-19 Presented below is information related to Ricky Henderson Company.
Cost Retail
Beginning inventory $ 200,000 $ 280,000
Purchases 1,375,000 2,140,000
Markups 95,000
Markup cancellations 15,000
Markdowns 35,000
Markdown cancellations 5,000
Sales revenue 2,200,000
Compute the
inventory by the conventional retail inventory method. (Round
ratios for computational purposes to 0 decimal places, e.g. 78% and final
answer to 0 decimal places, e.g. 28,987.)
Ending
inventory using conventional retail inventory method $
E10-2 Martin Buber Co. purchased land as a factory site for $400,000. The
process of tearing down two old buildings on the site and constructing the
factory required 6 months.
The company
paid $42,000 to raze the old buildings and sold salvaged lumber and brick
for $6,300. Legal fees of $1,850 were paid for title investigation and
drawing the purchase contract. Martin Buber paid $2,200 to an engineering
firm for a land survey, and $68,000 for drawing the factory plans. The
land survey had to be made before definitive plans could be drawn. Title
insurance on the property cost $1,500, and a liability insurance premium paid
during construction was $900. The contractor’s charge for construction was
$2,740,000. The company paid the contractor in two installments:
$1,200,000 at the end of 3 months and $1,540,000 upon
completion. Interest costs of $170,000 were incurred to finance the
construction.
Determine the
cost of the land and the cost of the building as they should be recorded on the
books of Martin Buberk Co. Assume that the land survey was for the building.
Cost of the
Land $
Cost of the
Building $
E10-23 Plant assets often require expenditures subsequent to acquisition. It is
important that they be accounted for properly. Any errors will affect both the
balance sheets and income statements for a number of years.
For each of the
following items, indicate whether the expenditure should be capitalized or
expensed in the period incurred.
Items
(a) Improvement.
(b) Replacement of a minor broken part on a machine.
(c) Expenditure that increases the useful life of an
existing asset.
(d) Expenditure that increases the efficiency and
effectiveness of a productive asset but does not increase its salvage value.
(e) Expenditure that increases the efficiency and
effectiveness of a productive asset and increases the asset’s salvage value.
(f) Expenditure that increases the quality of the
output of the productive asset.
(g) Improvement to a machine that increased its fair
market value and its production capacity by 30% without extending the machine’s
useful life.
(h) Ordinary repairs.
TUTORIAL PREVIEW
|
|
Cost
|
|
Retail
|
|
Beginning inventory
|
$ 200,000
|
|
$ 280,000
|
|
Purchases
|
1,375,000
|
|
2,140,000
|
|
Totals
|
1,575,000
|
|
2,420,000
|
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