Part A Multiple Choice (20 marks) 1. Wilson Co, purchased land as a factory site for 600,000. Wilson paid 60.000 to tear down two buildings on the land, Salvage was sold for 5,400, Legal fees of 3,480 were paid for title investigation and making the purchase. Architect's fees were 31,200. Title insurance cost 2,400, and liability insurance during construction cost 2.600. Excavation cost 10,440. The contractor was paid 2,200,000. Pavement cost was 6.400. Interest costs during construction were 170,000 The cost of the land that should be recorded by Wilson Co. is a. 660,480 b. 666.880. c. 669.880. d. 676,280 2. How should the following costs affect a retailer's inventory valuation? Freight-in Interest on Inventory loan il Increase No effect b. Increase Increase c. 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 1B. LF normally sells for 15 per unit, and 1B for es per unit. If Turner sells 1,000 units of LF, what amount of gross profit should it recognize? a. 1.875 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 2 contract. At the end of the current fiscal year, the raw material to be purchased under this contract had a market value of 2.3 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 3
