Accounting problems

Exercise 1 – Inventory Costing Methods

Shop sells high-end widgets. During 2020, the company has the following inventory transactions:

Units Cost/Unit Total Cost
Beginning inventory 10 $310 $ 3,100
Purchases: May 7 20 330 6,600
November 6 16 340 5,440
Goods Available for Sale 46 $ 15,140
Units Sold 40

Required: Work must be shown to receive any credit.
1. Using FIFO, calculate ending inventory and cost of goods sold.
2. Using LIFO, calculate ending inventory and cost of goods sold.
3. Using Average Cost, calculate ending inventory and cost of goods sold.

Property, Plant & Equipment (Purchase):

The Company purchased land as a factory site. An old building on the property was demolished, and construction began on a new building. Transactions incurred during the first year are listed below:

Land purchase $ 70,000
Demolition of old building 8,000
Sale of salvaged materials 1,200
Architect fees for new building 14,000
Legal fees for title investigation of land 2,000
Building construction costs 510,000

Required: Work must be shown to receive any credit.
Determine the amounts that the company should report for the Land and the Building, respectively.


Property, Plant & Equipment (Depreciation):

Unit purchased restaurant equipment on June 1, 2019, for $35,000. The residual value at the end of an estimated 10-year useful life is expected to be $5,000.

Required: Work must be shown to receive any credit.
Calculate the depreciation expense for 2019 and 2020, using the straight-line depreciation method, assuming a December 31 year-end. Show the depreciation amount for each year, separately.


Property, Plant & Equipment (Sale):

Services purchased a tractor at a cost of $30,000 and sold it exactly three years later for $16,000. recorded depreciation using the straight-line method, a five-year useful life, and a $4,000 residual value.

Required: Work must be shown to receive any credit.
What is the book value of the tractor on the date of the sale?
What is the amount of the gain or loss on the sale of the tractor?
What is the amount of the gain or loss if the tractor is sold for $14,000, instead of $16,000.

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