The beginning inventory for Waldo Co and data on purchases and sales for a three-month period are shown in Problem 7-1A

PR 7-2A LIFO Perpetual Inventory

The beginning inventory for Waldo Co and data on purchases and sales for a three-month period are shown in Problem 7-1A.

Instructions
1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in Exhibit 4, using the last-in, first-out method.
2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period.
3. Determine the ending inventory cost.

Click here for the solution: The beginning inventory for Waldo Co and data on purchases and sales for a three-month period are shown in Problem 7-1A

Howit Inc. operates a retail operation that purchases and sells snowmobiles, amongst other outdoor products

P5-6B Howit Inc. operates a retail operation that purchases and sells snowmobiles, amongst other outdoor products. The company purchases all merchandise inventory on credit and uses a periodic inventory system. The accounts payable account is used for recording inventory purchases only; all other current liabilities are accrued in separate accounts. You are provided with the following selected information for the fiscal years 2005 through 2008, inclusive.

2005 2006 2007 2008
Income Statement Data
Sales $96,850 $ (e) $82,220
Cost of goods sold (a) 25,140 25,990
Gross profit 69,640 61,540 (i)
Operating expenses 63,500 (f) 52,060
Net income $ (b) $4,570 $ (j)

Balance Sheet Data
Merchandise inventory $13,000 $ (c) $14,700 $ (k)
Account payable 5,800 6,500 4,600 (l)

Additional Information
Purchases of merchandise
Inventory on account $25,890 $ (g) $24,050
Cash payments to supplies (d) (h) 24,650

Instructions
(a) Calculate the missing accounts.
(b) Sales declined over the 3-year fiscal period, 2006-2008. Does that mean that profitability necessarily also declined? Explain, computing the gross profit rate and the profit margin ratio for each fiscal year to help support your answer. (Round to one decimal place.)

Click here for the solution: Howit Inc. operates a retail operation that purchases and sells snowmobiles, amongst other outdoor products

Rick Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows

7. Rick Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows: (Note: The company uses a perpetual system of inventory.)

Units Unit Price Total Cost
January 1—Beginning inventory 18 $24 $432
March 12—Sold 13
April 11—Purchase 45 $29 $1,305
June 20—Sold 33
Aug 16—Purchase 35 $27 $945
Sept 11—Sold 29
Total Cost of Inventory
Ending inventory is 23 units. $2,682

What is the cost of goods sold for Rick Company for 2012 using LIFO?


Click here for the solution: Rick Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows

A company that records credit purchases in a purchases journal and records purchases returns

ACC 225 Week 7

Exercise 7-16

A company that records credit purchases in a purchases journal and records purchases returns in a general journal made the following errors. Indicate when each error should be discovered.
1. Posted a purchases return to the Accounts Payable account and to the creditor’s subsidiary account but did not post the purchases return to the Inventory account.
2. Posted a purchases return to the Inventory account and to the Accounts Payable account but did not post to the creditor’s subsidiary account.
3. Correctly recorded a $4,000 purchase in the purchases journal but posted it to the creditor’s subsidiary account as a $400 purchase.
4. Made an addition error in determining the balance of a creditor’s subsidiary account.
5. Made an addition error in totaling the Office Supplies column of the purchases journal.


Click here for the solution: A company that records credit purchases in a purchases journal and records purchases returns

Mike purchases a heavy-duty truck (5-year class recovery property) for his delivery service on April 30, 2010

Mike purchases a heavy-duty truck (5-year class recovery property) for his delivery service on April 30, 2010. The truck is not considered a passenger automobile for purposes of the listed property and luxury automobile limitations. The truck has a depreciable basis of $39,080 and an estimated useful life of 5 years. Its estimated salvage value is $1,080. Assume no election to expense is made and no bonus depreciation is taken.

a. Calculate the amount of depreciation for 2010 using financial accounting straight-line depreciation (not the straight-line MACRS election) over the truck's estimated useful life.
b. Calculate the amount of depreciation for 2010 using the straight-line depreciation election under MACRS over the minimum number of years.
c. Calculate the amount of accelerated depreciation for 2010 that Mike could deduct using MACRS.


Click here for the solution: Mike purchases a heavy-duty truck (5-year class recovery property) for his delivery service on April 30, 2010

Lansbury Company purchases equipment on January 1, Year 1, at a cost of $518,000

Lansbury Company purchases equipment on January 1, Year 1, at a cost of $518,000. The asset is expected to have a service life of 12 years and a salvage value of $50,000.

(a) Compute the amount of depreciation for each of Years 1 through 3 using the straight-line depreciation method.
(b) Compute the amount of depreciation for each of Years 1 through 3 using the sum-of-the-years’-digits method.
(c) Compute the amount of depreciation for each of Years 1 through 3 using the double-declining balance method. (In performing your calculations, round constant percentage to the nearest one hundredth of a point and round answers to the nearest dollar)


Click here for the solution: Lansbury Company purchases equipment on January 1, Year 1, at a cost of $518,000

On January 1, 2011, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $150,000

P 12-15 Fair value option; held-to-maturity investments

On January 1, 2011, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $150,000. The Cortland bonds have a stated interest rate of 6%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows:

January 1, 2011 7.0%
June 30, 2011 8.0%
December 31, 2011 9.0%

Required:
1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2011 (ignoring brokerage fees), and prepare a journal entry to record the purchase.
2. Prepare all appropriate journal entries related to the bond investment during 2011, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.
3. Prepare all appropriate journal entries related to the bond investment during 2011, assuming that Ithaca chose the fair value option when the bonds were purchased, and that Ithaca determines fair value of the bonds semiannually. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.


Click here for the solution: On January 1, 2011, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $150,000

Bumper Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 1.5/15, net 40

Bumper Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 1.5/15, net 40. If the firm chooses to pay on time but does not take the discount, assuming a 365 day-year, what is the

a. nominal interest cost for passing up (not taking) the credit

b. effective annual percentage cost of its non-free trade credit

Click here for the solution: Bumper Enterprises purchases $4,562,500 in goods per year from its sole supplier on terms of 1.5/15, net 40

On January 1, 2011, P Company purchases equipment from its 80% owned subsidiary for $600,000

Problem 7-3 On January 1, 2011, P Company purchases equipment from its 80% owned subsidiary for $600,000. The carrying value of the equipment on the books of S Company was $450,000. The equipment had a remaining useful life of six years on January 1, 2011. On January 1, 2012, P Company sold the equipment it an outside party for $550,000.

Required:
A. Prepare in general journal form the entries necessary in 2011 and 2012 on the books of P Company to account for the purchase and sale of the equipment.
B. Determine the consolidated gain or loss on the sale of the equipment and prepare in general journal from the entry necessary on the December 31, 2012, consolidated statements workpaper to property reflects this gain or loss.

Click here for the solution: On January 1, 2011, P Company purchases equipment from its 80% owned subsidiary for $600,000