1)

Sullivan Produce Co. switched from FIFO to LIFO on January 1, 2015, for external reporting and income tax purposes, while retaining FIFO for internal reports. On that date, the FIFO inventory equaled $360,000. The ensuing three-year period resulted in the following:

	Inventory	Cost
Date	Year-End Costs	Index
December 31, 2015	$438,000	1.05
December 31, 2016	460,000	1.15
December 31, 2017	520,000	1.25

Refer to Exhibit 7-5. The ending inventory at December 31, 2016, at base-year price is:

$402,000

$400,000

$424,000

$406,000

2)

A derivative may be classified as:

a shareholders' equity account only.

either an asset or a liability account.

an asset account only.

a liability account only.

3)

In 2014, Xenex Market Services began development of a customer management software package for their own internal use and incurred $40,000 costs related to conceptual formulation of design alternatives. In 2015, management agreed to fully fund development of the software and spent $120,000 in development costs. In 2016, development was completed after incurring an additional $160,000 in development costs plus another $ 60,000 was spent on training costs for using the software. In 2017, the company started using the software and began amortizing related costs over a 10-year expected useful life. What is the amount of amortization expense for 2017 for this internally-developed software?

$32,000

$34,000

$38,000

$28,000