The following information is available from the company’s records in June 2013 for Product Z.
|
Units |
Unit Costs |
|
|
6/1/2013 beginning inventory |
1,000 |
$16.00 |
|
Purchase on 6/5/2013 |
2,700 |
$17.00 |
|
Purchase on 6/16/2013 |
2,500 |
$19.00 |
|
Purchase on 6/25/2013 |
1,000 |
$22.00 |
|
Purchase on 6/27/2013 |
1,800 |
$23.00 |
A physical inventory on June 30, 2013 shows 2,000 units on hand (assume the company maintains periodic inventory). Show all supporting computations to calculate the cost of ending inventory at June 30, 2013 under each of the following inventory methods. Use the answer sheet provided.
a. FIFO
b. LIFO
The following information pertains to PVP Company:
|
Date |
Ending inventory at end of year prices |
Price Index |
|
12/31/2010 |
$189,000 |
100 |
|
12/31/2011 |
$154,440 |
117 |
|
12/31/2012 |
$195,200 |
122 |
a. Show supporting computations under the dollar value LIFO method to calculate the amount of ending inventory at December 31, 2011. Use the answer sheet provided.
b. Show supporting computations under the dollar value LIFO method to calculate the amount of ending inventory at December 31, 2012. Use the answer sheet provided.
A&O Co. uses the LIFO retail inventory method to estimate its inventory for interim statement purposes. Information relating to the computation of the inventory at 7/31/2013 is as follows:
Cost Retail
Inventory, 1/1/13 $ 145,000 $ 280,000
Purchases 580,000 810,000
Freight-in 70,000
Markups, net 110,000
Sales 790,000
Estimated normal shoplifting losses 14,000
Markdowns, net 30,000
Show computation to determine the cost of estimated inventory at 7/31/2013 under the LIFO retail method. Use the answer sheet provided.
On January 1, 2012, PVP Corp borrowed $2,900,000 (5-year note) at 9% payable annually, to finance the construction of a new building. In 2012, the company made the following expenditures related to this building:
|
May1: $1,700,000 |
July 31: 2,400,000 |
Dec 31: $1,500,000 |
The company has two additional debts as follows:
|
Ten year 10% bond dated 12-31-2007, interest payable annually |
$3,000,000 |
|
Three year 8% note dated 6-30-2011, interest payable annually |
$2,500,000 |
Show all calculations for each of the following, using the answer sheet provided.
a. Weighted average accumulated expenditures
b. Avoidable interest
A&E Company exchanged asset A to acquire asset B from PVP Company. PVP paid $100,000 cash to A&E in this exchange. The following information pertains to the exchange:
|
A&E Asset A |
PVP Asset B |
|
|
Cost |
$2,671,000 |
$2,999,000 |
|
Accumulated depreciation |
1,355,000 |
1,699,000 |
|
Fair market value |
1,555,000 |
1,455,000 |
|
Cash given by PVP |
—— |
100,000 |
Prepare a journal entry using the answer sheet provided to record the exchange on the books of A&E Company assuming the exchange lacks commercial substance:
1. Under the Measurement Principle of accounting, the most commonly used measurements are based on
a. Expense recognition and historical cost principles.
b. Revenue recognition and fair value principles.
c. Historical cost and fair value principles.
d. Revenue recognition and historical cost principles.
2. Gains or losses from exchange of foreign currencies should not be presented as extraordinary items because
a. The underlying transactions are not expected to recur in the foreseeable future.
b. They are nonrecurring material items that differ significantly from company s typical business activities.
c. Such gains or losses are considered components of income from continuing operation.
d. The gains or losses are unusual in nature and infrequent in occurrence.
3. Which of the following earnings per share (EPS) figures is NOT disclosed on the face of the income statement?
a. Income from continuing operations net of tax.
b. Gain on disposal of discontinued operations, net of tax.
c. Extraordinary gain net of tax.
d. All of the above are disclosed.
4. Which of the following is never classified as an extraordinary item?
a. Material losses from a major casualty.
b. Gains or losses on disposal of a component of an entity.
c. Material losses from expropriation of assets.
d. A significant gain on the sale of the only security investment a company has ever had.
5. A company makes a change in accounting for its construction contracts from a percentage of completion to the completed contract method. This type of change is recognized
- As a change in accounting estimate that requires adjustments to prior years presented.
- As a correction of an error.
- As a change in accounting principle by making a retrospective adjustment to the financial statements.
- As a change in accounting principle that does not require a retrospective adjustment.
6. Under the allowance method, an entry to write off an uncollectible account
- Increases bad debt expense when the write off occurs.
- Decreases bad debt expense when the write off occurs.
- Increases allowance for bad debt account when the write off occurs.
d. Reduces both allowance for bad debt account and accounts receivable when the write off occurs.
7. In a period of falling prices, the inventory method, which gives the lowest value for ending inventory is
a. specific identification.
b. first-in, first-out.
c. last-in, first-out.
d. weighted-average.
8. A&E Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduced or written off on its balance sheet. The impairment test(s) to be used is (are)
a. Recoverability and Fair value tests.
b. Recoverability test.
c. Historic cost and fair value tests.
d. Fair value test.
9. A company decided to change its inventory valuation method from FIFO to LIFO in a period of rising prices. What would be the result of the change on ending inventory and cost of goods sold in the year of change?
Ending inventory Cost of goods sold
a. Increase Increase
b. Increase Decrease
c. Decrease Decrease
d. Decrease Increase
10. Which of the following statements is incorrect with respect to accounting for impairment of long-lived assets?
a. A restoration of previously recognized impairment loss is not permitted if the asset will continue to be used in business.
b. If an impairment loss is recognized, the adjusted carrying amount of a long-lived asset becomes its new cost basis.
c. Impaired assets held for sale may continue to be depreciated until the sale is finalized.
d. Impairment loss equals excess of carrying amount over fair value for assets held for use.
1. On August 1, 2011, A&O Corp. purchased equipment for $870,000. The machine has 8 year estimated life and a $40,000 estimated salvage value. Show supporting computations, using the answer sheet provided, to calculate depreciation expense on the equipment for 2012 under the double-declining balance method.
2. On July 1, 2011, A&O Corp. purchased equipment for $870,000. The machine has 8 year estimated life and a $42,000 estimated salvage value. Show supporting computations, using the answer sheet provided, to calculate depreciation expense on the equipment for 2012 under the sum-of-the-years -digits method
3. AVP Co. had a balance of $231,000 in its Accumulated Depreciation account on 1/1/2012. At 12/31/2012, the balance in that account was $275,000. During 2012, AVP sold equipment with an original cost of $35,000 and accumulated depreciation of $25,000. Calculate the amount AVP recorded as depreciation expense for the year.
4. PVP, Inc. had the following infrequent transactions during 2012:
A $10,000 write-down of receivables.
A $100,000 gain from the exchange of foreign currencies.
A $10,000 write-off of obsolete inventory.
A $100,000 gain from abandonment of equipment used in the business.
PVP s tax rate is 30%. Calculate the amount PVP should report for items not considered extraordinary.
5. PVP Co. had a balance of $91,000 in its Accounts Receivable account on 1/1/2012. At 12/31/2012, the balance was $105,000. PVP wrote-off $17,000 in uncollectible accounts during the year and collected $130,000 of Accounts Receivable during the year. Calculate the amount PVP recorded as credit sales.
6. VAP Corporation received cash of $24,000 on August 1, 2012 for two year’s rent in advance and recorded the transaction with a credit to Rent Revenue. What is the December 31, 2012 adjusting entry? Assuming VAP chooses to make reversing entries, what is the required reversing entry under the guidelines for this transaction?
7. A&O Corp. provided the following information for May 2012, from its perpetual inventory system:
|
May 1 balance 500 units @ $25 |
May 8 sales 300 units @ $35 |
|
May 10 purchases 400 units @ $30 |
Mary 19 sales 200 units @ $40 |
Assuming the LIFO perpetual method, calculate A&O s May 2012 cost of goods sold.
8. A&E Company’s accounting records indicated the following information for May 2012:
Inventory, 5/1/12 $ 99,000
Purchases during May 69,000
Sales during May 129,000
A physical inventory taken on May 31, 2012, resulted in an ending inventory of $70,000. A&E’s gross profit is 50% on its cost. A&E suspects some inventory may have been taken by a new employee. At May 31, 2012, what is the estimated cost of missing inventory?
9. On January 1, 2012, A&E Co. acquired a new truck with a fair value of $27,000. In exchange, A&E traded an old truck with a cost of $29,000, accumulated depreciation of $11,000, and a fair value of $30,000. In this exchange, A&E received a cash difference of $3,000. Assuming that this exchange lacks commercial substance, show calculations for any gain or loss that should be recognized by A&E on this exchange (round to the nearest dollar).
10. PVP Co. obtained a Patent on 1/1/2010, incurring legal costs of $21,000. The company amortizes the Patent over 10 years. PVP successfully defended its Patent on 1/1/2011, incurring $5,400 in legal fees. Calculate the amortization expense for 2011.