5 accounting questiosn

Question 1 Brake Company utilizes the perpetual inventory method. Inventory information for Part # AB124 revealed the following for the month of May: May 1 Balance 245 units @ $8 May 11 Purchased 800 units @ $9.50 May 20 Purchased 770 units @ $11 May 10 Sold 210 @ $23.50 May 16 Sold 300 @ $23 May 26 Sold 350 @ $24.50 Required: Determine the value of ending inventory and gross profit under each of the following methods: (a) LIFO (b) FIFO (c) Average Cost Question 2 Grande Incorporated, a window installation company, is preparing its annual financial statements for the year ended December 31, 2009 and the following information in dollars is available: FIFO Cost Replacement Cost Sales Price 70,000 84,000 50,000 90,000 79,000 81,000 Lowered glass doors Thermal windows 116,000 110,000 120,000 150,000 150,000 145,000 Total 380,000 410,000 455,000 Raw Material Aluminum Cedar shake siding Selling Expenses are 15% of Sales. Normal Profit Margin is 20% of Sales. At December 31, 2009, the balance in Grande's Raw Material inventory account was $380,000 and the Allowance to Reduce Inventory to Market had a credit balance of $50,000. Required: (a) Prepare a table with the headings below (and a row for each type of raw material) and determine the proper balance in the Allowance to Reduce Inventory to Market account at December 31, 2009. Raw Materia l FIFO Cost Replacement Cost Ceiling 1 Floor Deemed Market Value Lower of Cost or Market (b) Determine the amount of gain or loss that would be recorded due to the change in the Allowance to Reduce Inventory to Market account. Question 3 Lola industries purchased the following assets and constructed a building as well. All of this was done during the current year. Assets 1 and 2: These assets were purchased as a lump sum for $110,000 cash. The following was gathered: Description Initial Cost on Seller's Books Depreciation to Date on Seller's Books Book Value on Seller's Books Appraised Value Machinery Office Equipment $100,000 70,000 $40,000 25,000 $60,000 45,000 $81,000 44,000 Asset 3 Office Equipment was acquired by issuing 300 shares of $6 par value common stock. The stock had a market value of $14 per share. Construction of Building A building was constructed on land purchased last year at a cost of $150,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows: Date 2/1 6/1 9/1 11/1 Payment $100,000 380,000 460,000 120,000 To finance construction of the building, a $600,000 10% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 7%. Required: Record all of the applicable acquisition/construction entries for each of these assets. Question 4 Rohan Company purchased equipment in January 2008 for $8,000,000 and had an estimated useful life of 6 years with a salvage value of $2,000,000. At December 31, 2010, new technology was introduced that would accelerate the obsolescence of Rohan's equipment. Rohan's controller estimates that expected future net cash flows on the equipment will be $4,900,000 and that the fair value of the equipment is $4,600,000. Rohan intends to continue using the equipment, but it is estimated that the remaining life is 2 years and new salvage value is $1,000,000. Rohan uses straight-line depreciation. 2 Required: (a) Prepare the journal entry (if any) to record the impairment at December 31, 2010. (b) Prepare any journal entries for the equipment at December 31, 2011. Question 5 On May 1, 2011, Walker Company (a US company) paid US$3,700,000 to acquire all of the common stock of Hayden Corporation (an Australian company), which now became a division of Walker. Hayden reported the following US$ balance sheet at the time of the acquisition: Book Value $ Fair 900,000 Value $ 1,500,00 0 Noncurrent Assets 2,700,000 2,300,00 0 Current liabilities (600,000) (700,00 0) Long-term liabilities (500,000) (400,00 0) Current Assets At December 31, 2011, Hayden reports the following US$ balance sheet information: Bo ok Value $ Current Assets 800,000 Fair Value $ 800,00 0 (700,000) 1,300,00 0 (700,00 0) (500,000) Noncurrent Assets (excluding Goodwill) (400,00 0) 1,500,000 Current liabilities Long-term liabilities During the annual impairment test conducted on December 31, 2011, it was determined that the fair value of the Hayden division as a whole was $2,400,000. Required: (a) Compute the amount of goodwill recognized, if any, on May 1, 2011. (b) Determine the impairment loss, if any, to be recorded on December 31, 2011. (c) Determine the implied fair value of goodwill on December 31, 2011. (d) On the assumption that the fair value of Hayden on December 31, 2010 was $1,650,000 instead of $2,400,000, determine the impairment loss, if any, to be recorded. 3