Q1. Torres, Inc. made wiring harnesses for the automotive industry. They manufactured two basic models, the standard and the enhanced.
Standard Enhanced
Historical cost $70 $90
Current replacement cost 80 80
Net realizable value 100 90
Net realizable value less profit margin 90 70
What amount should be used to value these two items according to the lower cost or market valuation rules? [Show your calculations]
Q2. XYZ, Inc. sells a variety of outdoor equipment. They sell a lightweight backpack that they purchase from an overseas supplier. The following information pertaining to the purchase of these backpacks during September is presented below. They Sold 124 units during the month of September.
Date purchased Explanation Units Unit Cost
Sept 1 Beg Inventory 30 $97
Sept 12 purchases 45 102
Sept 19 purchases 20 104
Sept 26 purchases 50 125
Required: Calculate the ending inventory using LIFO and also using FIFO. Calculate the Cost of Goods Sold using both LIFO and FIFO.
Q3. Garcia Inc., a small construction company, had several transactions relating to its long-lived assets during the year:
a. The company purchased a new truck from the local truck dealer. The list price was $30,000. They traded-in their old truck and gave the dealer an additional $10,000 in cash. The blue book value (fair market value) of the old truck was estimated at $8,000. The truck had originally cost 20,000 and the company had taken 15,000 of depreciation (current book value of $5,000).
b. The company sold equipment for $1,000. The machine originally cost $5,000 (depreciation taken was $3,500).
c. The company purchased a new machine for $10,000. It has an estimated useful life of 10 years and no residual value. The company records depreciation expense using the double declining balance method.
Required: Prepare journal entries in good form for each of the above transactions.
Q4. On 1/1/16, Johnson, Inc. purchased a new Backhoe (equipment) for cash. The machine cost $83,000. It had an estimated residual value of $20,000 and estimated service life of 7 years. Calculate depreciation expense for 2016 and 2017...
a. using straight line depreciation
b. using sum of the years digits
c. using 200% declining balance (six different calculations)