Week Three Exercise Assignment Essay
1. Specific identification method. Boston Galleries uses the specific identification method for inventory valuation. Inventory information for several oil paintings follows.
Painting | Cost |
1/2 Beginning inventory | Woods | $11,000 |
4/19 Purchase | Sunset | 21,800 |
6/7 Purchase | Earth | 31,200 |
12/16 Purchase | Moon | 4,000 |
Woods and Moon were sold during the year for a total of $35,000. Determine the firm’s
a. cost of goods sold.
Woods goods 11,000
Woods Inventory 11,000
Moon Goods 4,000
Moon Inventory 4,000
Total …show more content…
(1) produce an up-to-date inventory valuation on the balance sheet?
FIFO would be used because units purchased first would be sold first, keeping the inventory current
(2) approximate the physical flow of a sand and gravel dealer?
LIFO would be used seeing how newer units placed in front, which are then sold in that order last in is the first to leave
(3) report low earnings (for tax purposes) for a separate electronics company that has been experiencing declining purchase prices?
FIFO would be used since the older units are priced higher
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 residual 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
Cost $30,000 – Residual Value / 20,000*5, 100,000 = $0.24 depreciation rate
Miles 17,000 * 0.24 / 1 = $4,080 depreciation expense