Part A Multiple Choice (20 mark) 1. Wilson Co purchased land as a factog sate for 0.000. Wilson pud 60,000 of 3.480 were paid for tale vestigation and making the purchase. Architect's to tear down two buildings on the land Salvage was sold for E5400. Legal fees fees were 31.200 Title insurance cost 2.400, hability insurance during construction cost 2.500 Excavation cost 10,400 The contractor was paid 2,200,000. Pavement cost was 6,00. Incest costs daring construction were 170,000 The cost of the land that should be recorded by Wilson Co. is a 660,480 666,680 c. 669.880 d 676,280 A. c. 2. How should the following costs affect a retailer's inventory valuation? Freight-in Interest on Inventory Increase No effect b Increase Increase No effect Increase d. No effect No effect 3. Turner Corporation acquired two inventory items at a lump-sum cost of 50,000. The acquisition included 3,000 units of product LF, and 7,000 units of product IB. LF normally sells for 15 per unit, and 13 for 5 per unit. If Turner sells 1,000 units of LF, what amount of gross profit should it recognize? a. E1,875 b. 5,625 c. 10,000 d. 11.875 4. During the current fiscal year, Jeremiah Corp signed a long-term non- cancellable purchase commitment with its primary supplier. Jeremiah agreed to purchase 2.5 million of raw materials during the next fiscal year under this contract. At the end of the current fiscal year, the raw material to be purchased under this contract had a market value of 023 million. What is the journal entry at the end of the current fiscal year? a. Debit Unrealized Holding Loss for 200,000 and credit Purchase Commitment Liability for 200,000 b. Debit Purchase Commitment Liability for 200,000 and credit Unrealized Holding Gain for 200,000 c. Debit Unrealized Holding Loss for 2.300,000 and credit Purchase Commitment Liability for 2,300,000 d. No journal entry is required. 5. The following information is available for October for Barton Company Beginning inventory 50.000 Net purchases 150,000 Net sales 300,000 Percentage markup on cost 66.67% A fire destroyed Barton's October 31 inventory, leaving undamaged inventory with a cost of 3,000. Using the gross profit method, the estimated ending Inventory destroyed by fire is: a. 17.000 b. 77.000 c. 80,000 d. 100,000 6. Which of the following is not a correct statement under the gross profit method? a. The beginning inventory plus the purchases equal total goods to be accounted for b. Goods not sold must be on hand. c. If the sales, reduced to the cost basis, are deducted from the sum of the opening inventory plus purchases, the result approximates the amount of inventory on hand d. (1 minus the rate of gross profit on cost) is applied to sales to approximate COGS
