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The following data was provided by Noelta Inc.

Cost Retail

Inventory, 12/31/15 $375,000 $ 550,000

Purchases 1,369,000 2,050,000

Purchase returns 90,000 120,000

Purchase discounts 27,000

Gross sales (after employee discounts) 2,110,000

Sales returns 145,000

Markups 180,000

Markup cancellations 60,000

Markdowns 65,000

Markdown cancellations 30,000

Freight-in 63,000

Employee discounts granted 12,000

Normal Loss from breakage 8,000

Required:

Assuming that Noelta Inc. uses the conventional retail inventory method (LCNRV method), compute the cost of its ending inventory at December 31, 2016. (25 marks)

Question 3

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Early in 2016, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization of Dobbs's manufacturing facility. Construction began on July 31, 2016 and was completed on November 1, 2016.

In order to help finance the construction, Dobbs issued a $400,000 of 3-year, 12% note payable, issued at par on July 31, 2016, with interest payable annually on July 31. $300,000 of the proceeds of the note was paid to Kiner, Inc on July 31, 2016 and the remainder of the note was temporarily invested in short term marketable trading securities at 10% until November 1, 2016. On November 1, Dobbs made a final payment of $100,000 to Kiner, Inc.

Summary of payments to Kiner, Inc. during 2016:

Date Payment

July 31, 2016 $300,000

November 1, 2016 100,000

In addition to the 12% note payable, the only other debt Dobbs had outstanding at December 31, 2016 was a $30,000, 8% note payable dated January 1, 2013 and due in 6 years, with interest payable annually on December 31.

Required:

A. Calculate the following. Round all computations to the nearest dollar.

i. Interest revenue earned by Dobbs in 2016 (3 marks)

ii. Weighted-average accumulated expenditures (4 marks)

iii. Avoidable interest (3 marks)

iv. Actual interest (7 marks)

v. Total interest cost capitalized during 2016. (3 marks)

B. Prepare the December 31, 2016 journal entries needed on the books of Dobbs Corporation. (10 marks)