WEEK
2 EXERCISES ASSIGNMENT
E9-3 Michael Bolton Company
E9-12 Mark Price Company
E9-19 Ricky Henderson Company.
E10-2 Martin Buber Co
E10-23 Plant assets often require
E10-24 On December 31, 2014, Travis Tritt Inc
Exercise 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 $
Exercise 9-12
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 $
Exercise 9-19
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 $
Ending inventory using conventional retail inventory method $
Exercise 10-2
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 $
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 $
Exercise 10-23
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.
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.
Exercise 10-24
On
December 31, 2014, Travis Tritt Inc. has a machine with a book value of
$940,000. The original cost and related accumulated depreciation at this date
are as follows.
Machine $1,300,000
Less:
Accumulated depreciation 360,000
Book
value $940,000
Depreciation
is computed at $60,000 per year on a straight-line basis.
Presented
below is a set of independent situations. For each independent situation,
indicate the journal entry to be made to record the transaction. Make sure that
depreciation entries are made to update the book value of the machine prior to
its disposal.
A
fire completely destroys the machine on August 31, 2015. An insurance
settlement of $430,000 was received for this casualty. Assume the
settlement was received immediately. (Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter 0 for
the amounts.)
Date Account
Titles and Explanation Debit Credit
August
31, 2015
(To record current
depreciation.)
August
31, 2015
(To record loss of the
machine.)
On
April 1, 2015, Tritt sold the machine for $1,040,000 to Dwight Yoakam
Company. (Credit account titles are automatically indented when amount is
entered. Do not indent manually. If no entry is required, select "No
Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles
and Explanation Debit
Credit
April
1, 2015
(To record current
depreciation.)
April
1, 2015
(To record sale of the
machine.)
On
July 31, 2015, the company donated this machine to the Mountain King City
Council. The fair value of the machine at the time of the donation was
estimated to be $1,100,000. (Credit account titles are automatically indented
when amount is entered. Do not indent manually. If no entry is required, select
"No Entry" for the account titles and enter 0 for the amounts.)
Date
Account
Titles and Explanation Debit
Credit
July
31, 2015
(To record current
depreciation.)
July
31, 2015
(To record donation of
the machine.)
TUTORIAL PREVIEW
(a)
|
Inventory, May 1 (at cost)
|
|
$160,000
|
|
Purchases (at cost)
|
|
640,000
|
|
Purchase discounts
|
|
(12,000)
|
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