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ANSWERS
ACC 422 Final Exam
Question 2
Presented below is information
related to Rembrandt Inc.`s inventory.
(per unit) Skis Boots Parkas
Historical Cost 273.79 152.75 76.37
Selling Price 312.70 208.95 106.27
Cost to distribute 27.38 11.53 3.60
Current replacement cost 292.52 151.31 73.49
Normal profit margin 46.11 41.79 30.62
Determine the following:
Question 3
Matlock Company uses a perpetual
inventory system. Its beginning inventory consists of 67 units that cost $40
each. During June, the company purchased 202 units at $40 each, returned 8
units for credit, and sold 168 units at $67 each. Journalize the June
transactions.
Question 4
Amsterdam Company uses a periodic
inventory system. For April, when the company sold 700 units, the following
information is available.
Compute the April 30 inventory and
the April cost of goods sold using the average cost method.
Question 5
Amsterdam Company uses a periodic
inventory system. For April, when the company sold 600 units, the following
information is available.
Compute the April 30 inventory and
the April cost of goods sold using the FIFO method.
Question 6
(FIFO, LIFO, Average Cost Inventory)
Esplanade Company was formed on
December 1, 2011. The following information is available from Esplanade`s
inventory records for Product BAP.
Purchases Units Unit Cost
January 1, 2012(beginning
inventory) 762 8.00
January 5, 2012 1,524 9.00
January 25, 2012 1,651 10.00
February 16, 2012 1,061 11.00
March 26, 2012 762 12.00
A physical inventory on March 31,
2012, shows 2,032 units on hand. Prepare schedules to compute the ending
inventory at March 31, 2012, under each of the following inventory methods.
Assume Esplanade Company uses the periodic inventory method.
Question 7
Floyd Corporation has the following
four items in its ending inventory. Determine the final lower of cost or market
inventory value for each item.
Question 8
Kumar Inc. uses a perpetual
inventory system. At January 1, 2013, inventory was $320,786 at both cost and
market value. At December 31, 2013, the inventory was $428,714 at cost and
$403,231 at market value. Prepare the necessary December 31 entry under:
Question 9
Boyne Inc. had beginning inventory
of $15,000 at cost and $25,000 at retail. Net purchases were $150,000 at cost
and $212,500 at retail. Net markups were $12,500; net markdowns were $8,750;
and sales were $196,250. Compute ending inventory at cost using the
conventional retail method.
Question 10
(Gross Profit Method)
Astaire Company uses the gross
profit method to estimate inventory for monthly reporting purposes. Presented
below is information for the month of May.
Question 11
Previn Brothers Inc. purchased land
at a price of $30,400. Closing costs were $1,820. An old building was removed
at a cost of $14,850. What amount should be recorded as the cost of the land?
Question 12
Garcia Corporation purchased a
truck by issuing an $108,000, 4-year, zero-interest-bearing note to Equinox
Inc. The market rate of interest for obligations of this nature is 10%. Prepare
the journal entry to record the purchase of this truck.
Question 13
Mohave Inc. purchased land,
building, and equipment from Laguna Corporation for a cash payment of $352,800.
The estimated fair values of the assets are land $67,200, building $246,400,
and equipment $89,600. At what amounts should each of the three assets be
recorded?
Question 14
Fielder Company obtained land by
issuing 2,000 shares of its $12 par value common stock. The land was recently
appraised at $103,700. The common stock is actively traded at $50 per share.
Prepare the journal entry to record the acquisition of the land.
Question 15
Navajo Corporation traded a used
truck (cost $23,600, accumulated depreciation $21,240) for a small computer
worth $4,366. Navajo also paid $1,180 in the transaction. Prepare the journal
entry to record the exchange.
Question 16
Mehta Company traded a used welding
machine (cost $10,080, accumulated depreciation $3,360) for office equipment
with an estimated fair value of $5,600. Mehta also paid $3,360 cash in the
transaction. Prepare the journal entry to record the exchange.
Question 17
Depreciation is normally computed
on the basis of the nearest
A). full month and to the nearest
dollar.
B). day and to the nearest cent.
C). day and to the nearest dollar.
D). full month and to the nearest
cent.
Question 18
Fernandez Corporation purchased a
truck at the beginning of 2012 for $54,180. The truck is estimated to have a
salvage value of $2,580 and a useful life of 206,400 miles. It was driven
29,670 miles in 2012 and 39,990 miles in 2013. Compute depreciation expense for
2012 and 2013.
Question 19
Lockhard Company purchased
machinery on January 1, 2012, for $79,200. The machinery is estimated to have a
salvage value of $7,920 after a useful life of 8 years.
(a) Compute 2012 depreciation
expense using the double-declining balance method.
(b) Compute 2012 depreciation
expense using the double-declining balance method assuming the machinery was
purchased on October 1, 2012.
Question 20
Jurassic Company owns machinery
that cost $1,145,700 and has accumulated depreciation of $458,280. The expected
future net cash flows from the use of the asset are expected to be $636,500.
The fair value of the equipment is $509,200. Prepare the journal entry, if any,
to record the impairment loss.
Question 21
Everly Corporation acquires a coal
mine at a cost of $501,600. Intangible development costs total $125,400. After
extraction has occurred, Everly must restore the property (estimated fair value
of the obligation is $100,320), after which it can be sold for $200,640. Everly
estimates that 5,016 tons of coal can be extracted. If 878 tons are extracted
the first year, prepare the journal entry to record depletion.
Question 22
Francis Corporation purchased an
asset at a cost of $58,200 on March 1, 2012. The asset has a useful life of 8
years and a salvage value of $5,820. For tax purposes, the MACRS class life is
5 years. Compute tax depreciation for each year 2012–2017.
Question 23
Celine Dion Corporation purchases a
patent from Salmon Company on January 1, 2012, for $50,820. The patent has a
remaining legal life of 16 years. Celine Dion feels the patent will be useful
for 10 years. Prepare Celine Dion`s journal entries to record the purchase of the
patent and 2012 amortization.
Question 24
Karen Austin Corporation has
capitalized software costs of $768,500, and sales of this product the first
year totaled $390,630. Karen Austin anticipates earning $911,470 in additional
future revenues from this product, which is estimated to have an economic life
of 4 years. Compute the amount of software cost amortization for the first
year.
(a) Compute the amount of software
cost amortization for the first year using the percent of revenue approach.
(b) Compute the amount of software
cost amortization for the first year using the straight-line approach.
Question 25
Jeff Beck is a farmer who owns land
which borders on the right-of-way of the Northern Railroad. On August 10, 2012,
due to the admitted negligence of the Railroad, hay on the farm was set on fire
and burned. Beck had had a dispute with the Railroad for several years
concerning the ownership of a small parcel of land. The representative of the
Railroad has offered to assign any rights which the Railroad may have in the
land to Beck in exchange for a release of his right to reimbursement for the
loss he has sustained from the fire. Beck appears inclined to accept the
Railroad`s offer. The Railroad`s 2012 financial statements should include the
following related to the incident:
A). recognition of a loss only.
B). creation of a liability only.
C). disclosure in note form only.
D). recognition of a loss and
creation of a liability for the value of the land.
Question 26
Roley Corporation uses a periodic
inventory system and the gross method of accounting for purchase discounts. On
July 1, Roley purchased $66,000 of inventory, terms 2/10, n/30, FOB shipping
point. Roley paid freight costs of $1,210. On July 3, Roley returned damaged
goods and received credit of $6,600. On July 10, Roley paid for the goods.
Prepare all necessary journal entries for Roley.
Question 27
Takemoto Corporation borrowed
$93,000 on November 1, 2012, by signing a $95,093, 3-month,
zero-interest-bearing note. Prepare Takemoto`s November 1, 2012, entry; the
December 31, 2012, annual adjusting entry; and the February 1, 2013, entry.
(For multiple debit/credit en tries, list amounts from largest to smallest,
e.g. 10, 8, 6. Round all answers to 0 decimal places, e.g. 11,150.)
Question 28
Whiteside Corporation issues
$629,000 of 9% bonds, due in 14 years, with interest payable semiannually. At
the time of issue, the annual market rate for such bonds is 10%. Compute the
issue price of the bonds.(Use the present value tables in the text.
Question 29
Indiana Jones Company enters into a
6-year lease of equipment on January 1, 2012, which requires 6 annual payments
of $37,560 each, beginning January 1, 2012. In addition, the lessee guarantees
a residual value of $20,870 at lease-end. The equipment has a useful life of 6
years. Assume that for Lost Ark Company, the lessor, collectibility is
reasonably predictable, there are no important uncertainties concerning costs,
and the carrying amount of the machinery is $191,722. Prepare Lost Ark`s
January 1, 2012, journal entries.
Question 30
On January 1, 2012, Irwin Animation
sold a truck to Peete Finance for $26,050 and immediately leased it back. The
truck was carried on Irwin`s books at $20,800. The term of the lease is 5 years,
and title transfers to Irwin at lease-end. The lease requires five equal rental
payments of $7,048 at the end of each year. The appropriate rate of interest is
11%, and the truck has a useful life of 5 years with no salvage value. Prepare
Irwin`s 2012 journal entries.
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