Who can do this by sunday 01/20/13 by 3pm

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CHAPTER 8

1. Amsterdam Company uses a periodic inventory system. For April, when the company sold 602 units, the following information is available.

	Units	Unit Cost	Total Cost
April 1 inventory	232	$15	$3,480
April 15 purchase	389	18	7,002
April 23 purchase	340	20	6,800
	961		$17,282

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

Ending inventory		$
Cost of goods sold		$
April 23	=	340 x $20	=	$6,800
April 15	=	19 x $18	=	342
Ending inventory				$7,142

Cost of goods available for sale				$17,282
Deduct ending inventory				7,142
Cost of goods sold				$10,140

2. Amsterdam Company uses a periodic inventory system. For April, when the company sold 578 units, the following information is available.

	Units	Unit Cost	Total Cost
April 1 inventory	291	$15	$4,365
April 15 purchase	409	19	7,771
April 23 purchase	337	20	6,740
	1,037		$18,876

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

Ending inventory

Cost of goods sold

April 1

291 x $15

$4,365

April 15

168 x $19

3,192

Ending inventory

$7,557

Cost of goods available for sale

$18,876

Deduct ending inventory

7,557

Cost of goods sold

$11,319

3.Presented below is information related to radios for the Couples Company for the month of July.

Date	Transaction	Units In	Unit Cost	Total	Units Sold	Selling Price	Total
July 1	Balance	110	$3.2	$352
6	Purchase	880	3.1	2,728
7	Sale				330	$6.9	$2,277
10	Sale				330	7.2	2,376
12	Purchase	440	4.1	1,804
15	Sale				220	7.5	1,650
18	Purchase	330	5.6	1,848
22	Sale				440	7.8	3,432
25	Purchase	550	6.0	3,300
30	Sale				220	8.1	1,782
	Totals	2,310		$10,032	1,540		$11,517

(a1)

Calculate average cost per unit. (Round average cost per unit to 2 decimal places, e.g. $2.76.)

Weighted average cost

$10,032 cost of goods available for sale ÷ 2,310 units available for sale = $4.34 weighted-average unit cost.

4 The following independent situations relate to inventory accounting. Answer the following questions about inventories. 1. Kim Co. purchased goods with a list price of $179,800, subject to trade discounts of 20% and 10%, with no cash discounts allowable. How much should Kim Co. record as the cost of these goods?

Cost of goods purchased

2. Keillor Company’s inventory of $1,131,000 at December 31, 2012, was based on a physical count of goods priced at cost and before any year-end adjustments relating to the following items.

(a)		Goods shipped from a vendor f.o.b. shipping point on December 24, 2012, at an invoice cost of $78,370 to Keillor Company were received on January 4, 2013.
(b)		The physical count included $29,500 of goods billed to Sakic Corp. f.o.b. shipping point on December 31, 2012. The carrier picked up these goods on January 3, 2013.

What amount should Keillor report as inventory on its balance sheet?

Inventory to be reported

3. Zimmerman Corp. had 1,660 units of part M.O. on hand May 1, 2012, costing $30 each. Purchases of part M.O. during May were as follows.

	Units	Units Cost
May 9	2,160	$32
17	3,660	33
26	1,160	35

A physical count on May 31, 2012, shows 2,160 units of part M.O. on hand. Using the FIFO method, what is the cost of part M.O. inventory at May 31, 2012? Using the LIFO method, what is the inventory cost? Using the average cost method, what is the inventory cost? (Round answers to 0 decimal places, e.g. 1,620.)

		FIFO		LIFO		Average Cost
Inventory Cost		$		$		$

4. Ashbrook Company adopted the dollar-value LIFO method on January 1, 2012 (using internal price indexes and multiple pools). The following data are available for inventory pool A for the 2 years following adoption of LIFO.

Inventory	At Base-Year Cost	At Current-Year Cost
1/1/12	$201,000	$201,000
12/31/12	242,000	266,200
12/31/13	259,000	295,260

Computing an internal price index and using the dollar-value LIFO method, at what amount should the inventory be reported at December 31, 2013? (Round price index and dollar-value LIFO inventory to 0 decimal places, e.g. 162.)

		December 31, 2013
Price Index
Dollar-value LIFO inventory		$

Donovan Inc., a retail store chain, had the following information in its general ledger for the year 2013.

Merchandise purchased for resale		$910,960
Interest on notes payable to vendors		9,360
Purchase returns		21,060
Freight-in		23,200
Freight-out		17,970
Cash discounts on purchases		7,050

What is Donovan’s inventoriable cost for 2013?

Donovan’s inventoriable cost for 2013	$
1.	$179,800 – ($179,800 x 20%)	=	$143,840;
	$143,840 – ($143,840 x 10%)	=	$129,456,	cost of goods purchased

2. $1,131,000 + $78,370 = $1,209,370. The $78,370 of goods in transit on which title had passed on December 24 (f.o.b. shipping point) should be added to 12/31/12 inventory. The $29,500 of goods shipped (f.o.b. shipping point) on January 3, 2013, should remain part of the 12/31/12 inventory. 3. Because no date was associated with the units issued or sold, the periodic (rather than perpetual) inventory method must be assumed.

FIFO inventory cost:	1,160 units	x	$35	$40,600
	1,000 units	x	33	33,000
	Total			$73,600

LIFO inventory cost:	1,660 units	x	$30	$49,800
	500 units	x	32	16,000
	Total			$65,800

Average cost:	1,660 units	x	$30	$49,800
	2,160 units	x	32	69,120
	3,660 units	x	33	120,780
	1,160 units	x	35	40,600
Totals	8,640			$280,300

$280,300 ÷ 8,640 = $32.44 Ending inventory (2,160 x $32.44) is $70,070.

4.	Computation of price indexes:

	12/31/12	=	$266,200	=	110
			$242,000

	12/31/13	=	$295,260	=	114
			$259,000

Dollar-value LIFO inventory 12/31/12:
Increase $242,000 – $201,000 =	$41,000
12/31/12 price index	x 1.10
Increase in terms of 110	45,100	2012 Layer
Base inventory	201,000
Dollar-value LIFO inventory	$246,100

Dollar-value LIFO inventory 12/31/13:
Increase $259,000 – $242,000 =	$17,000
12/31/13 price index	x 1.14
Increase in terms of 114	19,380	2013 Layer
2012 layer	45,100
Base inventory	201,000
Dollar-value LIFO inventory	$265,480

5.	The inventoriable costs for 2013 are:
	Merchandise purchased			$910,960
	Add:	Freight-in			23,200
					934,160
	Deduct:	Purchase returns	$21,060
		Purchase discounts	7,050		28,110
	Inventoriable cost			$906,050

CHAPTET 10

1.Hanson Company is constructing a building. Construction began on February 1 and was completed on December 31. Expenditures were $1,860,000 on March 1, $1,272,000 on June 1, and $3,010,100 on December 31. Hanson Company borrowed $1,064,600 on March 1 on a 5-year, 13% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,135,100 note payable and an 10%, 4-year, $3,779,500 note payable. Compute the weighted-average interest rate used for interest capitalization purposes. (Round answer to 2 decimal places, e.g. 7.58%.)

Weighted-average interest rate		%
	Principal		Interest
9%, 5-year note	$2,135,100		$192,159
10%, 4-year note	3,779,500		377,950
	$5,914,600		$570,109

Weighted-average interest rate	=	$570,109	=	9.64%
		$5,914,600

2. Navajo Corporation traded a used truck (cost $21,460, accumulated depreciation $19,314) for a small computer worth $3,541. Navajo also paid $537 in the transaction. Prepare the journal entry to record the exchange. (The exchange has commercial substance.) (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

3. Indicate which of the following costs should be expensed when incurred.

(a)		$13,000 paid to rearrange and reinstall machinery.

(b)		$200,000 paid for addition to building.

(c)		$200 paid for tune-up and oil change on delivery truck.

(d)		$7,000 paid to replace a wooden floor with a concrete floor.

(e)		$2,000 paid for a major overhaul on a truck, which extends the useful life.

4 The expenditures and receipts below are related to land, land improvements, and buildings acquired for use in a business enterprise.

(a)	Money borrowed to pay building contractor (signed a note)	$(276,000	)
(b)	Payment for construction from note proceeds	292,600
(c)	Cost of land fill and clearing	11,400
(d)	Delinquent real estate taxes on property assumed by purchaser	8,400
(e)	Premium on 6-month insurance policy during construction	7,600
(f)	Refund of 1-month insurance premium because construction completed early	(1,800	)
(g)	Architect’s fee on building	25,400
(h)	Cost of real estate purchased as a plant site (land $209,500 and building $52,730)	262,230
(i)	Commission fee paid to real estate agency	8,400
(j)	Installation of fences around property	4,800
(k)	Cost of razing and removing building	13,700
(l)	Proceeds from salvage of demolished building	(5,600	)
(m)	Interest paid during construction on money borrowed for construction	14,900
(n)	Cost of parking lots and driveways	20,700
(o)	Cost of trees and shrubbery planted (permanent in nature)	14,300
(p)	Excavation costs for new building	3,100

Identify each item by letter and list the items in columnar form, using the headings shown below. (Enter receipt amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Item		Accounts	Amount
(a)	Money borrowed to pay building contractor (signed a note)		$
(b)	Payment for construction from note proceeds
(c)	Cost of land fill and clearing
(d)	Delinquent real estate taxes on property assumed by purchaser
(e)	Premium on 6-month insurance policy during construction
(f)	Refund of 1-month insurance premium because construction completed early
(g)	Architect’s fee on building
(h)	Cost of real estate purchased as a plant site (land $202,900 and building $50,560)
(i)	Commission fee paid to real estate agency
(j)	Installation of fences around property
(k)	Cost of razing and removing building
(l)	Proceeds from salvage of demolished building
(m)	Interest paid during construction on money borrowed for construction
(n)	Cost of parking lots and driveways
(o)	Cost of trees and shrubbery planted (permanent in nature)
(p)	Excavation costs for new building		$

5 Plant acquisitions for selected companies are presented below. 1. Natchez Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Vivace Co., for a lump-sum price of $737,120. At the time of purchase, Vivace’s assets had the following book and appraisal values.

	Book Values	Appraisal Values
Land	$216,800	$162,600
Buildings	249,320	379,400
Equipment	325,200	325,200

To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.

Land	162,600
Buildings	249,320
Equipment	325,200
Cash		737,120

2. Arawak Enterprises purchased store equipment by making a $2,168 cash down payment and signing a 1-year, $24,932, 10% note payable. The purchase was recorded as follows.

Equipment	29,593
Cash		2,168
Notes Payable		24,932
Interest Payable		2,493

3. Ace Company purchased office equipment for $22,000, terms 2/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was:

Equipment	22,000
Cash		21,560
Purchase Discounts		440

4. Paunee Inc. recently received at zero cost land from the Village of Cardassia as an inducement to locate its business in the Village. The appraised value of the land is $29,268. The company made no entry to record the land because it had no cost basis. 5. Mohegan Company built a warehouse for $650,400. It could have purchased the building for $802,160. The controller made the following entry.

Buildings	802,160
Cash		650,400
Profit on Construction		151,760

Prepare the entry that should have been made at the date of each acquisition. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.	Account Titles and Explanation	Debit	Credit
1.



2.


3.

4.

5.

1.		Land	=	$737,120 x	$162,600	=	$138,210
					$867,200

		Buildings	=	$737,120 x	$379,400	=	$322,490
					$867,200

		Equipment	=	$737,120 x	$325,200	=	$276,420
					$867,200

3.		Accounts Payable	=	($22,000 x 0.98)		=	$21,560

6 Presented below is information related to Rommel Company. 1. On July 6, Rommel Company acquired the plant assets of Studebaker Company, which had discontinued operations. The appraised value of the property is:

Land		$434,010
Buildings		1,276,500
Equipment		842,490
Total		$2,553,000

Rommel Company gave 12,500 shares of its $100 par value common stock in exchange. The stock had a fair value of $187 per share on the date of the purchase of the property. 2. Rommel Company expended the following amounts in cash between July 6 and December 15, the date when it first occupied the building.

Repairs to building		$105,500
Construction of bases for machinery to be installed later		142,400
Driveways and parking lots		133,200
Remodeling of office space in building, including new partitions and walls		162,900
Special assessment by city on land		18,900

3. On December 20, the company paid cash for machinery, $290,000, subject to a 2% cash discount, and freight on machinery of $10,540. Prepare entries on the books of Rommel Company for these transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.	Account Titles and Explanation	Debit	Credit
1.




2.




3.

1.		Common Stock	=	(12,500 x $100)	=	$1,250,000
		Paid-in Capital in Excess of Par—Common Stock	=	($2,337,500 – $1,250,000)	=	$1,087,500

The cost of the property, plant and equipment is $2,337,500 (12,500 x $187). This cost is allocated based on appraised values as follows:

1.	Land	=	$434,010	x $2,337,500	=	$397,375
			$2,553,000

	Building	=	$1,276,500	x $2,337,500	=	$1,168,750
			$2,553,000

	Equipment	=	$842,490	x $2,337,500	=	$771,375
			$2,553,000

2.		Buildings	=	($105,500 + $162,900)	=	$268,400
3.		Cash	=	($10,540 + $284,200, which is 98% of $290,000)	=	$294,740

7 (Nonmonetary Exchange)

Montgomery Company purchased an electric wax melter on April 30, 2013, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.

	List price of new melter	$15,800
	Cash paid	10,000
	Cost of old melter (5-year life, $700 residual value)	12,700
	Accumulated depreciation–old melter (straight-line)	7,200
	Second-hand fair value of old melter	5,200

Prepare the journal entry(ies) necessary to record this exchange, assuming that the melters exchanged are (a) has commercial substance, and (b) lacks commercial substance. Montgomery's fiscal year ends on December 31, and depreciation has been recorded through December 31, 2012. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

	Description/Account	Debit	Credit
(a)

	(To record depreciation expense.)





	(To record purchase and trade-in of Melter.)
(b)

	(To record depreciation expense.)




	(To record purchase and trade-in of Melter.)
(a)	Exchange has commercial substance:
	Description/Account	Debit	Credit
	Depreciation expense	800
	Accumulated depreciation-Melter		800
	($12,700 - $700 = $12,000;
	$12,000 ÷ 5 = $2,400;
	$2,400 × 4/12 = $800)
	Melter	**15,200
	Accumulated depreciation-Melter	8,000
	Melter		12,700
	Cash		10,000
	Gain on disposal of plant assets		*500

*	Cost of old asset	$12,700
	Accumulated depreciation ($7,200 + $800)	(8,000)
	Book value	4,700
	Fair value of old asset	(5,200)
	Gain (on disposal of plant asset)	$500

**	Cash paid	$10,000
	FMV of old melter	5,200
	Cost of new melter	$15,200

(b)	Exchange lacks commercial substance
	Description/Account	Debit	Credit
	Depreciation expense	800
	Accumulated depreciation-Melter		800
	Melter	14,700**
	Accumulated depreciation-Melter	8,000
	Melter		12,700
	Cash		10,000

**	Cash paid	$10,000
	Fair value of old asset	4,700
	Cost of new asset	$14,700

(Classification of Land and Building Costs)

Spitfire Company was incorporated on January 2, 2013, but was unable to begin manufacturing activities until July 1, 2013, because new factory facilities were not completed until that date.

The Land and Building account reported the following items during 2013.

January 31	Land and building	$160,000
February 28	Cost of removal of building	9,800
May 1	Partial payment of new construction	60,000
May 1	Legal fees paid	3,770
June 1	Second payment on new construction	40,000
June 1	Insurance premium	2,280
June 1	Special tax assessment	4,000
June 30	General expenses	36,300
July 1	Final payment on new construction	30,000
December 31	Asset write-up	53,800
		399,950
December 31	Depreciation-2013 at 1%	4,000
December 31, 2013	Account balance	$395,950

The following additional information is to be considered.

1. To acquire land and building the company paid $80,000 cash and 800 shares of its 8% cumulative preferred stock, par value $100 per share. Fair market value of the stock is $117 per share.

2. Cost of removal of old buildings amounted to $9,800, and the demolition company retained all materials of the building.

3. Legal fees covered the following.

	Cost of organization	$ 610
	Examination of title covering purchase of land	1,300
	Legal work in connection with construction contract	1,860
		$3,770

4. Insurance premium covered the building for a 2-year term beginning May 1, 2013.

5. The special tax assessment covered street improvements that are permanent in nature.

6. General expenses covered the following for the period from January 2, 2013, to June 30, 2013.

	President's salary	$32,100
	Plant superintendent covering supervision of new building	4,200
		$36,300

7. Because of a general increase in construction costs after entering into the building contract, the board of directors increased the value of the building $53,800, believing that such an increase was justified to reflect the current market at the time the building was completed. Retained earnings was credited for this amount.

8. Estimated life of building - 50 years. Depreciation for 2013 - 1% of asset value (1% of $400,000, or $4,000).

Prepare entries to reflect correct land, building, and depreciation accounts at December 31, 2013. (Round amount for accumulated depreciation to 0 decimal places, e.g. 2,530. List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Description/Account	Debit	Credit
Land







Additional paid-in capital



Description/Account	Debit	Credit
Land (Schedule A)	188,700
Building (Schedule B)	136,250
Retained earnings	53,800
Salary expense	32,100
Prepaid insurance (16 months × $95)	1,520
Organization expense	610
Insurance expense (6 months × $95)	570
Land and building		399,950
Additional paid-in capital (800 shares × $17)		13,600
Land and building	4,000
Depreciation expense		2,637
Accumulated depreciation-Building		1,363

Schedule A
Amount consists of:
Acquisition cost [$80,000 + (800 × $117)]	$173,600
Removal of old building	9,800
Legal fees (Examination of title)	1,300
Special tax assessment	4,000
Total	$188,700

Schedule B
Amount consists of:
Legal fees (Construction contract)	$ 1,860
Construction costs (First payment)	60,000
Construction costs (Second payment)	40,000
Insurance (2 months)
[(2,280 ÷ 24) = $95 × 2 = $190]	190
Plant superintendent's salary	4,200
Construction costs (Final payment)	30,000
Total	$136,250

Schedule C
Depreciation taken	$4,000
Depreciation that should be taken
(1% × $136,250)	(1,363)
Depreciation adjustment	$2,637

Show the proper presentation of land, building, and depreciation on the balance sheet at December 31, 2013.

Plant, Property and Equipment
		$
	$
Less:
Total		$

359.60