New Accounting Problem

Similar to one I posted before.

All info attached.

2

>Highlighted Solution

1 – Long Problems

%

&

), filling in the highlighted sections. The possible marks

)

1

1

)

00

1

0

1

1

,000

1

1

1

500 1

Accounts payable 500 1

,150

1

=

1

eciable value =

=

1

Depr value

1

x

5

4,245

2 $ 13,150

x 0.30

2

5

3 $ 13,150

x 0.30

0

5

4 $ 13,150

x 0.30

,752

5

5 $ 13,150

x 0.30

5

depreciation

11,772 1

0
Year

1 0.20

2 0.20 X 13,150 = 2,630 3
3 0.20 X 13,150 = 2,630 3
4 0.20 X 13,150 = 2,630 3
5 0.20 X 13,150 = 2,630 3

13,150 1

1

1

Dr Cr

1

Accounts payable 200 1

Cash

2

750 2

ducks

Purchases

2

Accounts payable 270 2

Accounts payable 200 2

Cash

2

4 2

on June 10, 2008

Cash

2

Sales 450 2

1

s

purchased

of units purchased

Sales

in inventory

1 10 10

10

10 20 10 200 30 5
15 25 5 2
19 30 9 270

5

24 15 20 2

entries:

6/30/08

1

Purchases 570 1
6/30/08

80 1

80 1

6/30/08

1

Cost of goods sold 490 1

Units Unit Total

purchased cost cost

20

cost =

/

=

5

3

6 $2.10

3

31 $63.10 2
Sales Units

Average

sold Unit cost Total cost Unit cost Total cost Unit cost Total cost

8 $2.00

$2.10

$2.04

7

3 $2.00

$2.10

$2.04

7

6 $2.00

$2.00 $12.00 $2.04

7

17

4

Weighted
FIFO LIFO Average
Sales

$102.00 $102.00 3

Cost of sales 34.00 35.10 34.60 3

3

0

																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																						Chapter																																																										1					0
Please complete the following long problems (2,																		5		6		Possible Mark		Your Mark
	noted to the right will provide some guidance regarding the possible points awarded to each problem (and the
	number of responses per line)
	2.		(a)				Dr				Cr
Equipment (				cost	12,000
	Equipment (transportation)	600
Equipment (sales ta										x		9
	Equipment (transport insurance)			15
	Equipment (site preparation)			500
				Cash																									3
	Notes payable	9,000
							Accounts payable	2,150
	To record the purchase of a refrigerator
	Repairs expense
	To repair cables leading to refrigeration room
	NOTE: These cables would have had to be repaired anyway so this expense is not related to
	the purchase of the refrigerator
	(b)		One-and-one-half times declining balance depreciation method
	Cost =	1							4	straight-line rate = 1 / 5 =					0.				20
Salvage		value	1,000
		Depr		13,150	One-and-one-half times rate = 1.5 x	0.20					0.		30
	1 1/2 times		Remaining
	Deprec.		Accumul.		net book
			Year		Depreciable Base		Depreciation Expense
				$ 13,150		(14,150 – 0)	0.30		4,	24	9,905
(14,150 -4245)	2,9						7	7,2	17	6,934
(14,150 – 4245 – 2972)	2,0			8	9,296	4,854
(14,150 – 4245 – 2972 – 2080)	1,456									10	3,398
(14,150 – 4245 – 2972 – 2080 – 1456)	1,0	19		11,772	2,378
			Total
	(c)		Straight-line depreciation		Depr Expense
	Rate
									X						13,150 =						2,630		Straight-line rate = 1/5 = 0.20 per year
	Total depreciation
	(d)	The one-and-one-half times declining balance method allows for faster depreciation over the early
years of the oven’s useful life
	(e)	Usually, over the entire life of the oven the depreciation taken is the same under both methods but in this
case it is dependent on the salvage value.
	5.
	(1)		6/10/08					Purchases				200
	To record purchase of 20 ducks at $10 each – 2/10,net 30 credit terms
	(2)		6/15/08		750
							Sales
To record sale of	25
	(3)		6/19/08			270
	To record purchase of 30 ducks for $9 each on credit – no prompt payment discount
	(4)		6/20/08
196
Purchase discounts
To record payment for 20 ducks		purchased
	(5)		6/24/08		450
	To record sale of 15 ducks
	(6)								6/30/08	no entry
	Transaction date				Unit								Unit cost							Total cost				Units
	Opening Inv Jun		100
35
End of Period		Cost of sales
		Cost of goods		sold		570
	To close (transfer) the purchases to the cost of sales account
	Inventory
		Cost of goods sold
	To reduce the cost of sales for unconsumed purchases
	Income Summary		490
	To close the cost of goods sold account
	6.
	1/10/07						$2.00		$40.00			Average	$63.10	31				$2.04
	1/15/07				$2.10	$10.50
	1/26/07	$12.60
	Cost of sales based on various
	flow-through assumptions
			FIFO				LIFO			Weighted
	Dates
	1/13	$16.00	$16.80	$16.28
	1/18	$6.00	$6.30	$6.11
	$12.00	$12.21
$	34.00	$	35.10	$	34.60
		$102.00
	Gross profit	$68.00	$66.90	$67.40
132

Sherrill Palmer:
The declining balance calculation does not consider the salvage value in the depreciation of each period however, if the book value will fall below the salvage value, the last period might be adjusted so that it ends at the salvage value. When declining balance method does not fully depreciate an asset by the end of its life, variable declining balance method might be used instead. For purposes of this course, please indicate a remaining net book value.
Sherrill Palmer:
First issue: assume that the opening value of the inventory is $100 NOT $1000.
10 ducks at $10 = $100
Otherwise the problem will never make sense!
Sherrill Palmer:
Perpetual inventory systems record cost of goods sold and keep inventory at its current balance throughout the year. Therefore, there is no need to do a year-end inventory adjustment unless the perpetual records disagree with the inventory count. In addition, a separate cost of goods sold calculation is unnecessary since cost of goods sold is recorded whenever inventory is sold.
Unlike perpeturyal inventory, the inventory account in a periodic inventory system keeps its beginning balance until the end of period adjustment to the physical inventory count. Therefore, a separate cost of goods sold calculation is necessary. The following calculation shows the calculation for the preceding example.
Sherrill Palmer:
**Periodic Inventory System**
Inventory purchases are debited to the ‘Purchases’ account – see page 280
Sherrill Palmer:
A periodic inventory system does not require day-to-day tracking of physical inventory. Purchases, cost of goods sold, and inventory on hand cannot be tracked until the end of the accounting time period when a physical inventory is performed and ending inventory is compared against the sum of beginning inventory and purchases. Cost of ending inventory can be calculated by using the FIFO inventory accounting method or other less common methods.
Sherrill Palmer:
Keep in mind: FOB Riverfork
2 day delivery
Sherrill Palmer:
We are not told the inventory valuation.
Assume: FIFO
Sherrill Palmer:
ok – so this is a cheap Chianti!

Mod 5 Assignment Tpl

Possible Mark Your Mark
noted to the right will provide some guidance regarding the possible points awarded to each problem (and the
number of responses per line)
2. (a) Dr Cr

1

Equipment (transportation) 1

1

Equipment (transport insurance) 1
Equipment (site preparation) 1
Cash 1
Notes payable 1
Accounts payable 1

To record the purchase of a refrigerator

Repairs expense 1

Accounts payable 1
To repair cables leading to refrigeration room
NOTE: These cables would have had to be repaired anyway so this expense is not related to
the purchase of the refrigerator
(b) One-and-one-half times declining balance depreciation method

Cost =

1

1

1

1 1/2 times Remaining
Deprec. Accumul. net book
Year Depreciable Base Depreciation Expense Depr value

1 (14,150 – 0) x 0.30

4,545

2 x 5
3 x 5
4 x 5
5 x 5
Total depreciation 1

0
(c) Straight-line depreciation Depr Expense
Year Rate
1 0.20 X 13,150 = 2,630 Straight-line rate = 1/5 = 0.20 per year

2 X 3
3 X 3
4 X 3
5 X 3
Total depreciation 1
(d) 1
(e) 1

5. Dr Cr

(1) 6/10/08 Purchases 1
Accounts payable 1

To record purchase of 20 ducks at $10 each – 2/10,net 30 credit terms

(2) 6/15/08 2
2
(3) 6/19/08 2

2
To record purchase of 30 ducks for $9 each on credit – no prompt payment discount

(4) 6/20/08 2

2
2

(5) 6/24/08 2

2
To record sale of 15 ducks

(6) 6/30/08 1

Transaction date

Unit cost

Sales

Opening Inv Jun 1 10 10 100 10

5

2
5
2

6/30/08 Cost of goods sold 1
Purchases 1

To close (transfer) the purchases to the cost of sales account

6/30/08 Inventory 1
Cost of goods sold 1

To reduce the cost of sales for unconsumed purchases

6/30/08 Income Summary 1

Cost of goods sold 1
To close the cost of goods sold account
6. Units Unit Total
purchased cost cost

1/10/07 20 $2.00 $40.00
1/15/07 3
1/26/07 3

3

Cost of sales based on various
flow-through assumptions
Sales Units FIFO LIFO

Dates sold Unit cost Total cost Unit cost Total cost Unit cost Total cost

1/13 7
1/18 7
7
4

Weighted
FIFO LIFO Average

Sales 3
Cost of sales 3
Gross profit 3

0

Chapter 11 – Long Problems	0%	Please complete the following long problems (2, 5 & 6), filling in the highlighted sections. The possible marks
Equipment (cost)
Equipment (sales tax)
straight-line rate = 1 / 5 = 0.20
Salvage value =
Depreciable value =	One-and-one-half times rate = 1.5 x 0.20 = 0.30
	4,545	9,605
To record sale of 25 ducks
To record payment for 20 ducks purchased on June 10, 2008
Units purchased	Total cost of units purchased	Units in inventory
End of Period Cost of sales entries:
Average cost =
Weighted Average
133

The declining balance calculation does not consider the salvage value in the depreciation of each period however, if the book value will fall below the salvage value, the last period might be adjusted so that it ends at the salvage value. When declining balance method does not fully depreciate an asset by the end of its life, variable declining balance method might be used instead. For purposes of this course, please indicate a remaining net book value.
First issue: assume that the opening value of the inventory is $100 NOT $1000.
10 ducks at $10 = $100
Otherwise the problem will never make sense!
Perpetual inventory systems record cost of goods sold and keep inventory at its current balance throughout the year. Therefore, there is no need to do a year-end inventory adjustment unless the perpetual records disagree with the inventory count. In addition, a separate cost of goods sold calculation is unnecessary since cost of goods sold is recorded whenever inventory is sold.
Unlike perpeturyal inventory, the inventory account in a periodic inventory system keeps its beginning balance until the end of period adjustment to the physical inventory count. Therefore, a separate cost of goods sold calculation is necessary. The following calculation shows the calculation for the preceding example.
**Periodic Inventory System**
Inventory purchases are debited to the ‘Purchases’ account – see page 280
A periodic inventory system does not require day-to-day tracking of physical inventory. Purchases, cost of goods sold, and inventory on hand cannot be tracked until the end of the accounting time period when a physical inventory is performed and ending inventory is compared against the sum of beginning inventory and purchases. Cost of ending inventory can be calculated by using the FIFO inventory accounting method or other less common methods.
Keep in mind: FOB Riverfork
2 day delivery
We are not told the inventory valuation.
Assume: FIFO