A. Nonmonetary Exchange Review ProblemArnold Company recently entered into an exchange with Palmer Company. Arnold traded one of its lathes in exchange for a punch press from Palmer Company. The lathe's book value was $80,000 (original cost of $200,000 less $120,000 in accumulated depreciation) and its fair value was $90,000. The book value of the punch press was $110,000 (original cost of $180,000 less $70,000 of accumulated depreciation). The fair value of the punch press was $100,000. Arnold paid $10,000 to complete the exchange, and the exchange has commercial substance.Required:

1. Prepare the journal entry that Arnold would record for the exchange.

2. Prepare the journal entry that Palmer would record for the exchange.

B. Capitalized Interest Review ProblemOn January 1, 2018, the Gilligan Company began construction on a new manufacturing facility for its own use. The building was completed in early 2019. Throughout 2018, the company had interest-bearing debt, which included two long-term notes of $4,000,000 and $6,000,000 with annual interest rates of 6% and 8%, respectively. Construction expenditures incurred during 2018 were as follows:

Date Amount

January 1 $500,000

March 1 600,000

July 31 480,000

September 30 600,000

December 1 400,000

Required:

1. Calculate the amount of interest that Gilligan will capitalize related to the construction (notice that there is no construction-specific debt in this problem).

2. Assuming no other expenditures than those listed above, at what value should Gilligan record the building when construction is complete?

C. Dollar-Value LIFO Review ProblemDuring 2014, XYZ company decided to adopt the dollar-value LIFO method for externally reporting inventory. XYZ Company uses an external price index in its calculations. On December 31, 2014, XYZ Company had an inventory of $50,000. The following information has been extracted from XYZs inventory records:

Year Ended December 31, Ending Inventory at Year-End Costs, Cost Index(Relative to Base Year)

2015 $56,160 1.04

2016 $62,700 1.10

2017 $58,800 1.20

2018 $76,230 1.21

Required:

Compute XYZs ending inventory for each of the years ended December 31, 2014, 2015, 2016, 2017 and 2018.

D. Lower of Cost and Net Realizable Value Review ProblemThe Casper Golf Company has five inventory items as of December 31, 2018:

Item Number, Product, Historical, Cost Sales Price

Item #1 Shirts $28,000 $40,000

Item #2 Pants 48,500 50,000

Item #3 Shoes 17,000 16,000

Item #4 Golf Clubs 33,000 39,000

Item #5 Golf Balls 25,000 25,000

Assume that selling costs consist of a 10% sales commission.

Required:

1. Compute Casper's inventory value at 12/31/2018 assuming that the company applies the lower of cost and NRV rule on an individual item basis.

2. Compute Casper's inventory value at 12/31/2018 assuming that the company applies the lower of cost and NRV rule on a categorical basis. Assume the company has two product lines: clothing (shirts, pants and shoes) and equipment (clubs and balls).