Please Complete Each Of The Exercises Below In A Word Docume

Please Complete Each Of The Exercises Below In a Word Document

Please complete each of the exercises below in a Word document:

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

- Painting Cost

- Woods: $21,000 (beginning inventory)

- Sunset: $21,800 (purchased 4/19)

- Earth: $31,618 (purchased 6/7)

- Moon: $4,000 (purchased 4/16)

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, the company purchased:

- 700 units at $44 on February 21

- 800 units at $50 on March 28

Sales during this period were 1,400 units at $75 per unit.

Using a periodic inventory system, compare the results obtained under FIFO, LIFO, and weighted-average methods by filling in the chart for:

- Goods available for sale

- Ending inventory (March 31)

- Cost of goods sold

3. Perpetual inventory system: journal entries

At the beginning of 20X3, Beehler Company implemented a computerized perpetual inventory system. The first transactions include:

- 1/2/20X3 Purchases of 500 units @ $6 = $3,000

- 1/15/20X3 Sales of 300 units @ $8.50 = $2,550

- 1/20/20X3 Purchases of 200 units @ $5 = $1,000

- 1/25/20X3 Sales of 300 units @ $8.50 = $2,550

The president questions the absence of a Purchases account on the printout.

a. Duplicate the journal entries that would have appeared under FIFO and LIFO.

b. Calculate the balance in the Inventory account under each method.

c. Briefly explain to the president why the Purchases account is absent.

4. Inventory valuation methods: computations and concepts

Wild Riders Surfboard Company started operations on January 1. Purchases were:

- 1/3: 100 units @ $125

- 1/3: 200 units @ $135

- 1/3: 100 units @ $145

- 1/3: 100 units @ $155

Total purchase cost: $69,500 for 500 units.

Sales of 400 boards at $250 each occurred on these dates: 3/17 (50 units), 3/17 (75 units), 3/10 (275 units).

Use a perpetual system and calculate:

a. Cost of goods sold, ending inventory, and gross profit under FIFO, LIFO, and weighted average.

b. Which method best reflects:

- Up-to-date inventory valuation for the balance sheet?

- Lowest net income for tax purposes?

5. Depreciation methods

Mike Davis Enterprises bought a delivery van for $40,000 in January 20X7, with an estimated residual value of $6,000 and a 5-year life. Planning to drive 20,000 miles annually, compute 20X8 depreciation using:

a. Units-of-output (assuming 17,000 miles driven in 20X8)

b. Straight-line

c. Double-declining-balance

6. Depreciation computations

Alpha fraternity purchased a washing machine on January 1, 20X3, costing $2,000 with a residual value of $100 and estimated for 1,800 cycles over 4 years. Calculate:

a. Book value on December 31, 20X5, using straight-line

b. Depreciation expense for 20X4, units-of-output method (500 cycles)

c. Accumulated depreciation on December 31, 20X5, using double-declining-balance

7. Depreciation change in estimate

Aussie Imports bought machinery for $50,000 on January 1, 20X3, with a 5-year life (25,000 hours) and residual of $5,000.

Usage: 5,100; 4,800; 3,200; 6,000; 5,900 hours over five years.

Instructions:

a. Compute depreciation for 20X3-20X7 using straight-line, units of output, and double-declining-balance.

b. On Jan 1, 20X5, the remaining life was shortened to 15 months; compute depreciation for 20X5 assuming straight-line.

c. If the purchase price was $47,800, with additional costs ($800 freight, $1,400 setup/testing, $300 insurance), describe what you would do differently in part (a).

Paper For Above instruction

Exercises on Inventory Valuation, Depreciation, and Accounting Methods

The following comprehensive analysis addresses a series of accounting exercises spanning inventory valuation techniques, journal entries under perpetual systems, depreciation calculations, and the implications of changes in estimates. Each problem is approached with a detailed explanation, calculations, and contextual insights to illustrate core accounting principles.

1. Specific Identification Method

The first exercise involves determining the cost of goods sold, gross profit, and ending inventory for Boston Galleries, which employs the specific identification method. The inventory consists of multiple paintings with known costs, and some paintings have been sold during the year. Using the provided costs and sale information, we trace the specific paintings sold to assign their actual costs.

Since Woods ($21,000) and Moon ($4,000) were sold, and the total sale was $35,000, we need to match these paintings to their original costs. Woods is valued at $21,000, Moon at $4,000, totaling $25,000. The remaining sale value of $10,000 could be from other paintings or additional sales. However, since the problem states Woods and Moon were sold, and their costs are given, we can compute the cost of goods sold as the sum of the specific costs of the paintings sold. Assuming these were the only ones sold, COGS would be $21,000 + $4,000 = $25,000.

Gross profit is calculated by subtracting COGS from total sales: $35,000 - $25,000 = $10,000. The ending inventory consists of the remaining paintings, valued at their respective costs, which is the initial inventory minus the sold items, totaling to the remaining unsold paintings. If only Woods and Moon were sold, the ending inventory comprises Sunset ($21,800) and Earth ($31,618), totalling $53,418.

2. Inventory Valuation Methods: Basic Computations

The White Company's inventory begins with 300 units at $40 each. During the quarter, additional units are purchased, and sales are made. The problem requires calculating inventory valuation under FIFO, LIFO, and Weighted Average methods.

First, the total goods available for sale equals the sum of beginning inventory and purchases: 300 units at $40, 700 units at $44, and 800 units at $50, totaling 1,800 units. The total cost is calculated as (300 × 40) + (700 × 44) + (800 × 50) = $12,000 + $30,800 + $40,000 = $82,800.

Under FIFO, the oldest inventory is sold first; hence, ending inventory includes the most recent purchases. LIFO, conversely, assumes the most recent purchases are sold first, leaving older inventory. The weighted average cost per unit is derived by dividing total cost by total units: $82,800 / 1,800 units = approximately $46.

Calculations following these principles give the respective ending inventory, cost of goods sold, and total inventory values, illustrating differences among methods.

3. Perpetual Inventory System: Journal Entries

In the scenario involving Beehler Company, journal entries under a perpetual system reflect each transaction's impact immediately on inventory and related accounts. FIFO and LIFO significantly influence specific cost flow assumptions, affecting COGS and inventory valuation.

Under FIFO, the earliest purchase costs are assigned to the sold units. Hence, the journal entries for sales reduce inventory and record revenue and cost of goods sold based on the first batch purchased. LIFO, on the other hand, assigns the latest costs to sold units. The absence of a Purchases account in these entries reflects a perpetual system's direct recording of inventory purchases into inventory accounts without a separate Purchases ledger, which is characteristic in some configurations, especially when purchases are recorded directly into inventory tracks.

Calculating the ending inventory involves summing remaining units at their purchase costs according to each method, demonstrating how inventory valuation fluctuates based on the cost flow assumption used.

4. Inventory Valuation Methods: Computations and Concepts

Wild Riders Surfboard Company's inventory and sales data enable a comparison of FIFO, LIFO, and weighted-average cost methods. The calculations reveal how each method affects cost of goods sold, ending inventory, and gross profit, especially in a period with rising purchase costs.

Running these calculations shows FIFO results in a higher ending inventory valuation, as it uses the most recent (higher) costs for inventory, whereas LIFO results in a lower valuation, matching current costs to COGS. The weighted average smooths out fluctuations, averaging the costs over all units.

Strategic considerations illustrate that FIFO is preferred for balance sheet valuation, providing a more up-to-date inventory value, while LIFO often minimizes taxable income by maximizing COGS during inflationary periods.

5. Depreciation Methods

Mike Davis Enterprises' van depreciation for 20X8 is calculated using three methods. The units-of-output method considers actual miles driven, producing a depreciation expense proportional to usage. The straight-line evenly allocates the cost over the estimated service life. Double-declining-balance accelerates depreciation, applying a fixed rate to declining book value, resulting in higher expenses in early years.

For the units-of-output method: (17,000 miles / 20,000 miles) × (Cost – Residual value) = ($40,000 - $6,000) × (17,000 / 20,000) = $34,000 × 0.85 = $28,900.

Straight-line depreciation: ($40,000 - $6,000) / 5 years = $6,800 annually.

Double-declining-balance: 2 / 5 × $40,000 = $16,000 first year, with depreciation decreasing in subsequent years based on declining book value.

6. Depreciation Computations for the Washing Machine

Alpha fraternity's washing machine depreciates over 4 years with an original cost of $2,000, residual value of $100, and 1,800 cycles. Using the straight-line method, depreciation per year is ($2,000 - $100) / 4 = $475.

By December 31, 20X5, after two years, accumulated depreciation is $950. The book value at this date is $2,000 - $950 = $1,050.

Using units-of-output, with actual cycles for 20X4 totaling 500, depreciation for 20X4 = (500 / 1,800) × ($2,000 - $100) ≈ $133.

Under the double-declining balance, depreciation accelerates; the first year’s depreciation is 2 / 4 × $2,000 = $1,000, and subsequent years follow with diminishing balances, accumulating accordingly.

7. Change in Depreciation Estimate

Aussie Imports' machinery usage over five years indicates varying actual hours. Initially, depreciation is based on the prescribed service life and hours. When management shortens the remaining useful life in 20X5, depreciation for that year must be recalculated based on the new estimate of remaining service life (15 months).

If the actual usage differs from initial estimates, the depreciation expense calculations must be adjusted for the new remaining useful life, spreading the remaining depreciable amount over the revised period.

If the original purchase price was $47,800, with additional costs like freight ($800), setup/testing ($1,400), and insurance ($300), total capitalized cost increases, affecting depreciation calculations proportionally. These additions would be added to the machinery’s cost basis rather than expensed immediately, following proper asset capitalization protocols.

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