Week Three Exercise Assignment Inventory 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 $21,000 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. 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 two batches of goods: 700 Units at $44 on February 21 and 800 units at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per unit. The White Company uses a periodic 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 3. Perpetual inventory system: journal entries . At the beginning of 20X3, Beehler Company implemented a computerized perpetual inventory system. The first transactions that occurred during 20X3 follow: · 1/2/20X3 Purchases on account: 500 units @$6 = $3,000 · 1/15/20X3 Sales on account: 300 units @ $8.50 = $2,550 · 1/20/20X3 Purchases on Account: 200 units @ 5 = $1,000 · 1/25/20X3 Sales on Account: 300 units @ $8.50 = $2,550 The company president examined the computer-generated journal entries for these transactions and was confused by the absence of a Purchases account. a. Duplicate the journal entries that would have appearedon the computer printout under FIFO & LIFO b. Calculate the balance in the firm’s Inventory account under each method. c. Briefly explain the absence of the Purchases account to the company president. 4. Inventory valuation methods: computations and concepts. Wild Riders Surfboard Company began business on January 1 of the current year. Purchases of surfboards were as follows: Date Quantity Unit Cost Total Cost 1/3 100 $125 $12,500 4/3 200 $135 $27,000 6/3 100 $145 $14,500 7/3 100 $155 $15,500 Total 500 $69,500 Wild Riders sold 400 boards at $250 per board on the dates listed below. The company uses a perpetual inventory system. Date Quantity Sold Unit Price Total Sales 3/17 50 $250 $12,500 5/17 75 $250 $18,750 8/10 275 $250 $68,750 Total 400 $100,000 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 o.

1. Week Three Exercise Assignment
Inventory
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
$21,000
4/19 Purchase
Sunset
21,800
6/7 Purchase
Earth
31,200
12/16 Purchase
Moon
4,000
Woods
and

2. 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 inven-tory of the White
Company consisted of 300 units costing $40 each. During the
first quarter, the company purchased two batches of goods: 700
Units at $44 on February 21 and 800 units at $50 on March 28.
Sales during the first quarter were 1,400 units at $75 per unit.
The White Company uses a periodic 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
$
$

3. $
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
that occurred during 20X3 follow:
·
1/2/20X3 Purchases on account: 500 units @$6 =
$3,000
·
1/15/20X3 Sales on account: 300 units @ $8.50 = $2,550
·
1/20/20X3 Purchases on Account: 200 units @ 5 = $1,000
·

4. 1/25/20X3
Sales on Account: 300 units @ $8.50 = $2,550
The company president examined the computer-generated
journal entries for these transactions and was confused by the
absence of a Purchases account.
a. Duplicate the journal entries that would have appearedon the
computer printout under FIFO & LIFO
b. Calculate the balance in the firm’s Inventory account under
each method.
c. Briefly explain the absence of the Purchases account to the
company president.
4. Inventory valuation methods: computations and concepts.
Wild Riders Surfboard Company began business on January 1 of
the current year. Purchases of surfboards were as follows:
Date
Quantity
Unit Cost
Total Cost
1/3
100

5. $125
$12,500
4/3
200
$135
$27,000
6/3
100
$145
$14,500
7/3
100
$155
$15,500
Total
500
$69,500
Wild Riders sold 400 boards at $250 per board on the dates
listed below.
The company uses a perpetual inventory system.
Date
Quantity Sold
Unit Price
Total Sales
3/17
50

6. $250
$12,500
5/17
75
$250
$18,750
8/10
275
$250
$68,750
Total
400
$100,000
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

7. 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) show the lowest net income for tax purposes?
5.
Depreciation methods.
Mike Davis Enterprises purchased a delivery van for $40,000 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 $2,000, 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

8. 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 15 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.