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52. The following lots of a particular commodity were available for sale during the year:
Beginning inventory 10 units at $61
First purchase 25 units at $63
Second purchase 30 units at $64
Third purchase 15 units at $73

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year according to the average cost method? (Points: 4)
$1,300
$1,305
$1,415
$1,236

53. If the cost of an item of inventory is $60 and the current replacement cost is $65, the amount included in inventory according to the lower of cost or market is ________. (Points: 4)
$5
$60
$65
$125

54. During the taking of its physical inventory on December 31, 2008, Albert's Bike Shop incorrectly counted its inventory as $210,000 instead of the correct amount of $180,000. The effect on the balance sheet and income statement would be as follows: _________. (Points: 4)
assets overstated by $30,000;retained earnings understated by $30,000; net income statement understated by $30,000
assets overstated by $30,000;retained earnings understated by $30,000; no effect on the income statement
assets and retained earnings overstated by $30,000; net income overstated by $30,000
assets and retained earnings overstated by $30,000; net income understated by $30,000

55. If, while taking a physical inventory, the company counts their inventory figures more than the actual amount. How will the error affect their bottom line? (Points: 4)
No change to net income
Net income will be overstated
Net income will be understated
Only gross profit will be affected

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52. The following lots of a particular commodity were available for sale during the year:
Beginning inventory 10 units at $61
First purchase 25 units at $63
Second purchase 30 units at $64
Third purchase 15 units at $73

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year according to the average cost method? (Points: 4)
$1,300
$1,305
$1,415
$1,236
The total value of inventory is 10X61+25X63+30X64+15X73 = 5,200. Total units in ...

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The solution explains various multiple choice questions relating to inventory

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Sherman Company: journal entries, income statement, balance sheet, depreciation

Problem A

The following transactions occurred during the first year of operations at Sherman Co.

a. Issued common stock for cash
shares 400,000
par $ 6.00
total cash $ 2,400,000

b.At the beginning of the year, borrowed cash from the Lindquist National Bank
and signed a note.
amount borrowed $ 350,000
interest rate 6%
note due in 4 years

c. Incurred and paid salaries for the year.
amount $ 250,000

d. Purchased merchandise inventory, paying part in cash and the rest on account.
amount paid in cash $ 300,000
amount on credit $ 275,000

e. Sold inventory on credit.
inventory cost $ 280,000
total sales $ 410,000

f. Paid rent of $121,000 on the sales facilities
during the first 11 months of the year

g. Sold inventory for cash
inventory cost $ 200,000
total sales $ 290,000

h. Purchased store equipment, paying part in cash and
the rest on credit
equipment price $ 150,000
cash paid $ 65,000
remaining due in 90 days

i. Paid the following outstanding debts
for store equipment $ 75,000
due to suppliers $ 100,000

j. Incurred and paid utilities expense for the year.
amount $ 28,000

k. Collected cash from customers during the year for credit sales
previously recorded.
amount $ 375,000

l. At year-end, accrued interest on the note due to Lindquist National
Bank.
amount $ 21,000

m. At year-end, accrued past-due December rent on the sales facilities.
amount $ 11,000

Prepare an income statement and balance sheet from transaction data.

Problem B

Cost-flow assumptions?FIFO and LIFO using periodic and perpetual systems.
The inventory records of Twilight, Inc., reflected the following information for the year
ended December 31, 2005:
Number of Unit Total
Units Cost Cost
Inventory, January 1 200 25 5000
Purchases:
30-May 250 26 6500
28-Sep 400 28 11200
Goods available for sale 850 22700
Sales:
February-05 100
June-05 250
November-05 275
Total sales 625
Inventory, December 31 225

Required:
a. Assume that Twilight, Inc., uses a periodic inventory system. Calculate cost
of goods sold and ending inventory under FIFO and LIFO.

b. Assume that Twilight Inc., uses a perpetual inventory system. Calculate cost
of goods sold and ending inventory under FIFO and LIFO.

c. Explain why the FIFO results for cost of goods sold and ending inventory
are the same in your answers to parts a and b, but the LIFO results are
different.

d. Explain why the results from the LIFO periodic calculations in part a cannot
possibly represent the actual physical flow of inventory items.

Depreciation calculation methods. Hill Co. acquired a new delivery truck at the
beginning of its current fiscal year. The following information is available

cost $ 100,000
estimated useful life 5 years
estimated salvage value $ 5,000

Required:
a. Calculate depreciation expense for the first 4 years of the truck's life using:
1. Straight-line depreciation.
2. Sum-of-the-years'-digits depreciation.
3. Double-declining-balance depreciation.

b. Calculate the truck's net book value at the end of its third year of use under
each depreciation method.

c. Assume that Hill Co. had no more use for the truck after the end of the
third year and that at the beginning of the fourth year it had an offer from a
buyer who was willing to pay $6,200 for the truck. Should the depreciation
method used by Hill Co. affect the decision to sell the truck?

Problem C

Other accrued liabilities?payroll. The following summary data for the payroll period
ended on December 31, 2004, are available for Visquel and Associates

Gross pay 200,000
FICA tax withholdings ?
Income tax withholdings 22,500
Medical insurance contributions 2,150
Union dues 650
Total deductions 40,600
Net pay ?

Required:
a. Calculate the missing amounts and then determine the FICA tax withholding
percentage.
b. Use the horizontal model (or write the journal entry) to show the effects of
the payroll accrual.

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