Question
Question 1 Assume 007 Inc. made sales of $891.3 million during 2016. Cost of goods sold for the year totaled $581.2 million. At the end
Question 1
Assume 007 Inc. made sales of $891.3 million during 2016. Cost of goods sold for the year totaled $581.2 million. At the end of 2015, 007 Inc. inventories stood at $190.4 million, and the company ended 2016 with inventory of $232 million. Compute 007's gross profit percentage and rate of inventory turnover for 2016.
Question 2
Determine the effect on cost of goods sold, total assets, and gross margin for 2015 and 2016 if the following inventory errors are not corrected. Indicate your answer with (+) for overstated, (-) for understated, and (0) for no effect.
- Beginning inventory for 2015 is understated.
- Ending inventory for 2015 is understated.
- Cost of Goods Sold
- Effect in 2015 on Total Assets
- Gross Margin
- a.b.
- Cost of Goods Sold
- Effect in 2016 on Total Assets
- Gross Margin
- a.b.
Question 3
Oak Tree Ltd. Inventory records for a particular development program show the following at October 31, 2016:
Oct 1
Beginning inventory
5 units @
$150 =
$750
15
Purchase
11 units @
160 =
1,760
26
Purchase
5 units @
170 =
850
At October 31, 10 units of these programs are on hand. Oak Tree Ltd. uses the perpetual inventory system.
- Compute cost of goods sold and ending inventory, using each of the following methods:
- Specific unit cost, with two $150 units, three $160 units, and five $170 units still on hand at the end.
- Weighted-average cost
- First-in, first out cost
- Which method produces the highest cost of goods sold? Which method produces the lowest cost of goods sold? What causes the difference in cost of goods sold?
Question 4
Prepare journal entries for 2016 for the following independent situations. Assume each organization has a December 31styear end.
Keepers Inc. purchases a patent for $425,000 on January 1st. Keepers estimates this patent to have a 5-year useful life.
Blue Bat Corporation purchases one of their main competitors on March 31. Blue Bat paid $90,000 for this purchase which included assets of $70,000 and liabilities of $2,000. The goodwill is believed to have an indefinite benefit.
Question 5
Assume Interstellar Communications Ltd.'s balance sheet includes the following assets under Property, Plant, and Equipment: Land, Buildings, and Motor-Carrier Equipment. Interstellar Communications has a separate accumulated depreciation account for each of these assets except land. Further, assume that Interstellar completed the following transactions:
- Jan 2: Sold motor-carrier equipment with accumulated depreciation of $67,000 (cost of $130,000) for $70,000 cash. Purchased similar new equipment with a cash price of $176,000.
- July 3: Sold a building that had cost $650,000 and had accumulated depreciation of $145,000 through December 31 of the preceding year. Depreciation is computed on a straight-line basis. The building had a 40-year useful life and a residual value of $250,000. Interstellar received $100,000 cash and a $400,000 note receivable.
- Oct 29: Purchased land and a building for a single price of $420,000. An independent appraisal valued the land at $150,000 and the building at $300,000.
- Dec 31: Recorded depreciation as follows: New motor-carrier equipment has an expected useful life of six years and an estimated residual value of 5% of cost. Depreciation is computed on the double-diminishing-balance method. Depreciation on buildings is computed by the straight-line method. The new building carries a 40-year useful life and a residual value equal to 10% of its cost.
Please journalize each of the transactions from Jan 2nd - Dec 31st.
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