Reference no: EM131051983

 

Problem 1

 

Presented below is information related to Rembrandt Inc.'s inventory.

 

(per unit)	Skis	Boots	Parkas
Historical cost	$255.93	$142.78	$71.39
Selling price	292.30	195.32	99.34
Cost to distribute	25.59	10.78	3.37
Current replacement cost	273.44	141.44	68.70
Normal profit margin	43.10	39.06	28.62

 

Determine the following:

 

(a) The two limits to market value (e.g., the ceiling and the floor) that should be used in the lower of cost or market computation for skis; 

 

(b) the cost amount that should be used in the lower of cost or market comparison of boots; 

 

(c) the market amount that should be used to value parkas on the basis of the lower of cost or market. 

 

Problem 2

 

2. Matlock Company uses a perpetual inventory system. Its beginning inventory consists of 55 units that cost $33 each. During June, the company purchased 166 units at $33 each, returned 7 units for credit, and sold 138 units at $55 each. Journalize the June transactions.

 

Problem 3

 

Amsterdam Company uses a periodic inventory system. For April, when the company sold 700 units, the following information is available.

 

	Units	Unit Cost	Total Cost
April 1 inventory	250	$17	$4,250
April 15 purchase	400	20	8,000
April 23 purchase	350	22	7,700
	1,000		$19,950

 

Compute the April 30 inventory and the April cost of goods sold using the average cost method.

 

Problem 5

 

Amsterdam Company uses a periodic inventory system. For April, when the company sold 600 units, the following information is available.

 

	Units	Unit Cost	Total Cost
April 1 inventory	250	$15	$3,750
April 15 purchase	400	18	7,200
April 23 purchase	350	20	7,000
	1,000		$17,950

 

Compute the April 30 inventory and the April cost of goods sold using the FIFO method.

 

Inventory Cost of goods sold

 

 

Problem 6

 

(FIFO, LIFO, Average Cost Inventory)

 

Esplanade Company was formed on December 1, 2011. The following information is available from Esplanade's inventory records for Product BAP.

 

	Units	Unit Cost
January 1, 2012 (beginning inventory)	792	$8.00
Purchases:
January 5, 2012	1,584	9.00
January 25, 2012	1,716	10.00
February 16, 2012	1,056	11.00
March 26, 2012	792	12.00

 

A physical inventory on March 31, 2012, shows 2,112 units on hand.

 

Prepare schedules to compute the ending inventory at March 31, 2012, under each of the following inventory methods. Assume Esplanade Company uses the periodic inventory method.

 

 

(a) FIFO

 

(b) LIFO

 

(c) Weighted average 

 

 

Problem 7

 

Floyd Corporation has the following four items in its ending inventory.

 

Item	Cost	Replacement Cost	Net Realizable Value (NRV)	NRV Less Normal Profit Margin
Jokers	$2,552	$2,616	$2,680	$2,042
Penguins	6,380	6,508	6,316	5,232
Riddlers	5,614	5,806	5,902	4,721
Scarecrows	4,083	3,815	4,887	3,917

 

Determine the final lower of cost or market inventory value for each item.

 

Jokers $

 

Penguins $

 

Riddlers $

 

Scarecrows $

 

Problem 8

 

Kumar Inc. uses a perpetual inventory system. At January 1, 2013, inventory was $313,724 at both cost and market value. At December 31, 2013, the inventory was $419,276 at cost and $394,354 at market value. Prepare the necessary December 31 entry under:

 

a) the cost of goods sold method

 

(b) the loss method

 

Problem 9

 

Boyne Inc. had beginning inventory of $16,080 at cost and $26,800 at retail. Net purchases were $160,800 at cost and $227,800 at retail. Net markups were $13,400; net markdowns were $9,380; and sales were $210,380. Compute ending inventory at cost using the conventional retail method.

 

Problem 10

 

(Gross Profit Method)

 

Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

 

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales

 

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost.

 

Problem 11

 

Previn Brothers Inc. purchased land at a price of $29,210. Closing costs were $3,290. An old building was removed at a cost of $15,220. What amount should be recorded as the cost of the land?

 

Problem 12

 

Garcia Corporation purchased a truck by issuing an $96,000, 4-year, zero-interest-bearing note to Equinox Inc. The market rate of interest for obligations of this nature is 10%. Prepare the journal entry to record the purchase of this truck. 

 

Problem 13

 

Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $412,650. The estimated fair values of the assets are land $78,600, building $288,200, and equipment $104,800. At what amounts should each of the three assets be recorded?

 

Problem 14

 

Fielder Company obtained land by issuing 2,000 shares of its $13 par value common stock. The land was recently appraised at $110,500. The common stock is actively traded at $53 per share. Prepare the journal entry to record the acquisition of the land.

 

Problem 15

 

Navajo Corporation traded a used truck (cost $26,600, accumulated depreciation $23,940) for a small computer worth $4,921. Navajo also paid $1,330 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) 

 

Problem 16

 

Mehta Company traded a used welding machine (cost $9,990, accumulated depreciation $3,330) for office equipment with an estimated fair value of $5,550. Mehta also paid $3,330 cash in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.)

 

Problem 17

 

Depreciation is normally computed on the basis of the nearest

 

full month and to the nearest dollar.

 

day and to the nearest dollar.

 

day and to the nearest cent.

 

full month and to the nearest cent.

 

Problem 18

 

Fernandez Corporation purchased a truck at the beginning of 2012 for $58,380. The truck is estimated to have a salvage value of $2,780 and a useful life of 222,400 miles. It was driven 31,970 miles in 2012 and 43,090 miles in 2013. Compute depreciation expense for 2012 and 2013.(Round answers to 0 decimal places, i.e. 2,250.)

 

2012 $

 

2013 $

 

Problem 19

 

Lockhard Company purchased machinery on January 1, 2012, for $75,600. The machinery is estimated to have a salvage value of $7,560 after a useful life of 8 years.

 

(a) Compute 2012 depreciation expense using the double-declining balance method.  $

 

(b) Compute 2012 depreciation expense using the double-declining balance method assuming the machinery was purchased on October 1, 2012.(Round answer to 0 decimal places, i.e. 2,250.) $

 

Jurassic Company owns machinery that cost $1,270,800 and has accumulated depreciation of $508,320. The expected future net cash flows from the use of the asset are expected to be $706,000. The fair value of the equipment is $564,800. Prepare the journal entry, if any, to record the impairment loss.

 

Problem 21

 

Everly Corporation acquires a coal mine at a cost of $515,200. Intangible development costs total $128,800. After extraction has occurred, Everly must restore the property (estimated fair value of the obligation is $103,040), after which it can be sold for $206,080. Everly estimates that 5,152 tons of coal can be extracted. If 902 tons are extracted the first year, prepare the journal entry to record depletion.

 

Problem 22

 

Francis Corporation purchased an asset at a cost of $68,400 on March 1, 2012. The asset has a useful life of 8 years and a salvage value of $6,840. For tax purposes, the MACRS class life is 5 years. Compute tax depreciation for each year 2012-2017. (Round answers to 0 decimal places.)

 

2012 $

 

2013 $

 

2014 $

 

2015 $

 

2016 $

 

2017 $

 

Problem 23

 

Celine Dion Corporation purchases a patent from Salmon Company on January 1, 2012, for $53,220. The patent has a remaining legal life of 16 years. Celine Dion feels the patent will be useful for 10 years. Prepare Celine Dion's journal entries to record the purchase of the patent and 2012 amortization.

 

Problem 24

 

Karen Austin Corporation has capitalized software costs of $757,200, and sales of this product the first year totaled $415,380. Karen Austin anticipates earning $969,220 in additional future revenues from this product, which is estimated to have an economic life of 4 years. Compute the amount of software cost amortization for the first year.

 

(a) Compute the amount of software cost amortization for the first year using the percent of revenue approach. $

 

(b) Compute the amount of software cost amortization for the first year using the straight-line approach. $

 

Problem 25

 

Jeff Beck is a farmer who owns land which borders on the right-of-way of the Northern Railroad. On August 10, 2012, due to the admitted negligence of the Railroad, hay on the farm was set on fire and burned. Beck had had a dispute with the Railroad for several years concerning the ownership of a small parcel of land. The representative of the Railroad has offered to assign any rights which the Railroad may have in the land to Beck in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Beck appears inclined to accept the Railroad's offer. The Railroad's 2012 financial statements should include the following related to the incident:

 

disclosure in note form only.

 

recognition of a loss and creation of a liability for the value of the land.

 

recognition of a loss only.

 

creation of a liability only.

 

Problem 26

 

Roley Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. On July 1, Roley purchased $62,000 of inventory, terms 2/10, n/30, FOB shipping point. Roley paid freight costs of $1,480. On July 3, Roley returned damaged goods and received credit of $6,200. On July 10, Roley paid for the goods. Prepare all necessary journal entries for Roley.

 

Problem 27

 

Takemoto Corporation borrowed $115,800 on November 1, 2012, by signing a $118,406, 3-month, zero-interest-bearing note. Prepare Takemoto's November 1, 2012, entry; the December 31, 2012, annual adjusting entry; and the February 1, 2013, entry.

 

Problem 28

 

Whiteside Corporation issues $648,000 of 9% bonds, due in 11 years, with interest payable semiannually. At the time of issue, the annual market rate for such bonds is 10%. Compute the issue price of the bonds.

 

Problem 29

 

Indiana Jones Company enters into a 7-year lease of equipment on January 1, 2012, which requires 7 annual payments of $38,300 each, beginning January 1, 2012. In addition, the lessee guarantees a residual value of $20,810 at lease-end. The equipment has a useful life of 7 years. Assume that for Lost Ark Company, the lessor,  collectibility is reasonably predictable, there are no important uncertainties concerning costs, and the carrying amount of the machinery is $205,180. Prepare Lost Ark's January 1, 2012, journal entries.

 

Problem 30

 

On January 1, 2012, Irwin Animation sold a truck to Peete Finance for $25,800 and immediately leased it back. The truck was carried on Irwin's books at $19,300. The term of the lease is 5 years, and title transfers to Irwin at lease-end. The lease requires five equal rental payments of $7,515 at the end of each year. The appropriate rate of interest is 14%, and the truck has a useful life of 5 years with no salvage value. Prepare Irwin's 2012 journal entries.