Question 1. Presented below is a list of items which may or may not be reported as inventory in a company's December 31 balance sheet.
a) Materials on hand not yet placed into production by a manufacturing firm.
b) Goods purchased f.o.b. shipping point that are in transit at December 31.
c) Raw materials on which a manufacturing firm has started production , but which are not completely processed.
d) Costs identified with units completed by a manufacturing firm, but not yet sold.
e) Costs incurred to advertise goods held for resale.
Required: Indicate which of these items would typically be reported as inventory in the financial statements. If an item should not be reported as inventory , indicate how it should be reported in the financial statements.
Question 2. The following information about a company for the year 2014 has been availed to you.
January 1 Purchase of a lawn mower and accessories sh. 240,000
Useful life 5 years
Salvage value sh. 40,000
Estimated annual fuel cost sh. 10,000
Monthly salary of operator sh. 8,000
Required: Compute the depreciation charge for 2014,. Use the straight line method.