# Acc205 Week3 Inventory

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Week Three Exercise Assignment

Inventory

1. Specific identification method. 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.

2. Inventory valuation methods: basic computations. The January beginning inven­tory of the White Company consisted of 300 units costing \$40 each. During the first quarter, purchases were:

Date                       Quantity                Cost

1/15                        700                         \$45

1/31                        1200                       \$48

2/12                        800                         \$46

2/27                        650                         \$51

Sales during the first quarter were.

Date                       Sold

1/19                        500

2/2                          600

2/13                        500

2/28                        100

The White Company uses a perpetual inventory system

3. Perpetual inventory system: journal entries. At the beginning of 20X3, Beehler Company implemented a computerized perpetual inventory system. The following transactions occurred:

·        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

4. Inventory valuation methods: computations and concepts. Wave Riders Surfboard Company began business on January 1 of the current year. Below are the transactions for the year

:

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

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?

5. Depreciation methods. 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

6. Depreciation computations. 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:

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.

7. Depreciation computations: change in estimate. 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.

• 9 years ago

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Week Three Exercise Assignment

Inventory

1. Specific identification method. Boston Galleries uses the specific identification method for inventory valuation. Inventory information for several oil …

9 years ago

• ### ACC 205 Week 3 Exercise Assignment Inventory

ACC 205 Week 3 Exercise Assignment

1. Specific identification method. Boston Galleries uses the specific identification method for inventory valuation. Inventory information for …

9 years ago

• ### 1. Specific identification method. Boston Galleries uses the specific identification method for inventory valuation.

ACC 205 Week 3 Exercise Assignment

9 years ago

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Week Three Exercise Assignment

Inventory

1. Specific identification method. Boston Galleries uses the specific identification method for inventory valuation. Inventory information for several oil …