Specific identification method. Boston Galleries uses the specific identification method for inventory valuation. Inventory information for several oil paintings follows.
Cost 1/2 Beginning inventory
Woods $11,000 4/19 Purchase
Sunset 21,800 6/7 Purchase
Earth 31,200 12/16 Purchase
Moonwere 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 inven tory 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. Using the White Company data, fill in the following chart to compare the results obtained under the FIFO, LIFO, and weighted-average inventory methods. FIFO
LIFO Weighted Average Goods available for sale $ $ $ Ending inventory, March 31 Cost of goods sold
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. b. Calculate the balance in the firm s Inventory account. 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 b. 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 resid ual 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 b. Straight-line c. Double-declining-balance 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: a. The machine s book value on December 31, 20X5, assuming use of the straight-line depreciation method 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.