Part 1

Vargas Company uses the perpetual inventory method. Vargas purchased 600 units of inventory that cost $7.00 each. At a later date the company purchased an additional 1,000 units of inventory that cost $8.00 each. Vargas sold 700 units of inventory for $11.00. If Vargas uses a FIFO cost flow method, the amount of cost of goods sold appearing on the income statement will be:

• $5,000.

• $2,700.

• $4,200.

• $2,100.

Part 2

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $72,400 and $3,200, respectively. During the year Kincaid reported $197,000 of credit sales. Kincaid wrote off $1,850 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $239,900. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.

The amount of uncollectible accounts expense recognized in the Year 2 income statement will be:

• $1,970.

• $724.

• $2,399.

• $3,320.

Part 3

On January 1, Year 1, Wolly Company purchased a truck that cost $87,000. The truck had an expected useful life of 200,000 miles over 8 years and a $7,000 salvage value. During Year 2, Wolly drove the truck 30,000 miles. The amount of depreciation expense recognized in Year 2 assuming that Wolly uses the units-of-production method is:

• $9,000

• $12,000

• $13,000

• $30,000

Part 4

On January 1, Year 1 Zach Company purchased equipment that cost $53,000. The equipment had a useful life of 5 years and a $12,000 salvage value. Zach Company used the double-declining-balance method to depreciate its assets. What is the accumulated depreciation at the end of Year 2?

• $12,000

• $12,720

• $21,200

• $33,920