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1. ACC 205 Week 3 Exercise Assignment
Inventory - New
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1. Specific identification method. Boston Galleries uses the specific
identification method for inventory valuation. Inventory information for
several oil paintings follows.
Painting
Cost
1/2 Beginning inventory Woods $11,000
4/19 Purchase Sunset 21,800
6/7 Purchase Earth 31,200
12/16 Purchase Moon 4,000
Woods and Moon were sold during the year for a total of $35,000. Determine
the firm’s
a. cost of goods sold.
b. gross profit.
c. ending inventory.
2. Inventory valuation methods: basic computations. The January beginning
inven¬tory of the White Company consisted of 300 units costing $40 each.
During the first quarter, purchases were:
Date Quantity Cost
1/15 700 $45
1/31 1200 $48
2/12 800 $46
2/27 650 $51
Sales during the first quarter were.
Date Sold
1/19 500
2/2 600
2/13 500
2/28 100
The White Company uses a perpetual inventory system.
Using the White Company data, fill in the following chart to compare the
results obtained under the FIFO, LIFO, and weighted-average inventory
methods.
FIFO LIFO Weighted Average
Goods available for sale $ $ $
Ending inventory, March 31
Cost of goods sold

2. 3. Perpetual inventory system: journal entries. At the beginning of 20X3,
Beehler Company implemented a computerized perpetual inventory system. The
following transactions occurred:
• Purchases on account: 500 units @ $4 = $2,000
• Sales on account: 300 units @ $5 = $1,500
• Purchases on account: 600 units @ $5 = $3,000
• Sales on account: 300 units @ $5 = $1,500
a. Prepare journal entries for the above purchases and sales.
b. Calculate the balance in the firm’s Inventory account.
4. Inventory valuation methods: computations and concepts. Wave Riders
Surfboard Company began business on January 1 of the current year. Below are
the transactions for the year
:
1/3: Purchase 100 boards @ $125
3/17: Sold 50 boards @ $250
4/3: Purchase 200 boards @ $135
5/17: Sold 75 boards @ $250
6/3: Purchase 100 boards @ $145
1/3: Purchase 100 boards @ $155
3/17: Sold 300 boards @ $250
1/3: Purchase 100 boards @ $140
Wave Riders uses a perpetual inventory system.
Instructions
a. Calculate cost of goods sold, ending inventory, and gross profit under
each of the following inventory valuation methods:
• First-in, first-out
• Last-in, first-out
• Weighted average
b. Which of the three methods would be chosen if management’s goal is to
(1) produce an up-to-date inventory valuation on the balance sheet?
(2) approximate the physical flow of a sand and gravel dealer?
5. Depreciation methods. Betsy Ross Enterprises purchased a delivery van for
$30,000 in January 20X7. The van was estimated to have a service life of 5
years and a resid¬ual value of $6,000. The company is planning to drive the
van 20,000 miles annually. Compute depreciation expense for 20X8 by using
each of the following methods:
a. Units-of-output, assuming 17,000 miles were driven during 20X8
b. Straight-line
c. Double-declining-balance
6. Depreciation computations. Alpha AlphaAlpha, a college fraternity,
purchased a new heavy-duty washing machine on January 1, 20X3. The machine,
which cost $1,000, had an estimated residual value of $100 and an estimated
service life of 4 years (1,800 washing cycles). Calculate the following:
a. The machine’s book value on December 31, 20X5, assuming use of the
straight-line depreciation method
b. Depreciation expense for 20X4, assuming use of the units-of-output
depreciation method. Actual washing cycles in 20X4 totaled 500.
c. Accumulated depreciation on December 31, 20X5, assuming use of the double-
declining-balance depreciation method.
7. Depreciation computations: change in estimate. Aussie Imports purchased a
specialized piece of machinery for $50,000 on January 1, 20X3. At the time of
acquisition, the machine was estimated to have a service life of 5 years
(25,000 operating hours) and a residual value of $5,000. During the 5 years
of operations (20X3 - 20X7), the machine was used for 5,100, 4,800, 3,200,
6,000, and 5,900 hours, respectively.
Instructions
a. Compute depreciation for 20X3 - 20X7 by using the following methods:
straight line, units of output, and double-declining-balance.

3. b. On January 1, 20X5, management shortened the remaining service life of the
machine to 20 months. Assuming use of the straight-line method, compute the
company’s depreciation expense for 20X5.
c. Briefly describe what you would have done differently in part (a) if
Aussie Imports had paid $47,800 for the machinery rather than $50,000 In
addition, assume that the company incurred $800 of freight charges $1,400 for
machine setup and testing, and $300 for insurance during the first year of
use.