Evaluating the Maple Company and Teague Company
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Problem 1. Maple Company started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first unit cost $800 and the second, $700. One of the items was sold during the year.
Required: Based on this information, how much product cost would be allocated to cost of goods sold and ending inventory, assuming use of:
a. LIFO
b. FIFO
c. Weighted average
Problem 2. Teague Company purchased a new machine on January 1, 2012, at a cost of $150,000. The machine is expected to have an eight-year life and a $15,000 salvage value. The machine is expected to produce 675,000 finished products during its eight-year life. Smith produced 70,000 units in 2012 and 110,000 units during 2013.
Required:
1) Determine the amount of depreciation expense to be recorded on the machine for the years 2012 and 2013 under each of the following methods:
a) Straight-line method
b) Units of production method
c) Double-declining balance method
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