VIÐ103G - Heimadæmi 21-40

Formúlur

Net income + operating expenses = gross profit
Gross profit – operating expenses = net income
Sales – cost of goods sold – operating expenses = net income

Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

Inventory account.

Brocken Co. has the following data related to an item of inventory:

Inventory, May 1 3,000 units @ £4.20

Purchase, May 7 10,500 units @ £4.40

Purchase, May 16 2,100 units @ £4.50

Inventory, May 31 3,900 units



The value assigned to cost of goods sold if Brocken uses FIFO is

£50,880.

Vestle Company uses the periodic inventory system. For January 2020, the beginning inventory

consisted of 36,000 units that cost CHF12 each. During the month, the company made two
purchases: 15,000 units at CHF13 each and 60,000 units at CHF13.50 each. Vestle sold 64,500 units during the month for CHF19.50 per unit. Using the average-cost method, what is the amount of cost of goods sold for the month of January 2020 (round per unit amount to two
decimal places)?

CHF835,275.

A company just starting in business purchased three inventory items at the following prices.

First purchase €80; second purchase €95; third purchase €85. If the company sold two units for a total of €290 and used FIFO costing, the gross profit for the period would be

€115.

In a period of rising prices which inventory method generally provides the greatest amount of
net income?

FIFO

Carlsberg Corporation has 3,000 units of product#1and 6,000 units of product#2 in its inventory at December 31, 2020. Specific data with respect to each product follows:
Product#1 Product#2

Historical cost CHF40 CHF70

Net realizable value 45 54


What amount will be reported on the company statement of financial position at December 31, 2020 for ending inventory using lower-of-cost-or-net realizable value?

CHF444,000.

Homeplate sells softball equipment. On November 14, they shipped $4,000 worth of softball

uniforms to Bonita Middle School, terms 2/10, n/30. On November 21, they received an order

from Vista High School for $1,500 worth of custom printed bats to be produced in December.

On November 30, Bonita Middle School returned $200 of defective merchandise. Homeplate has
received no payments from either school as of month end. What amount will be recognized as
net accounts receivable on the statement of financial position as of November 30?

$3,800

Under the allowance method, writing off an uncollectible account

affects only statement of financial position accounts.

An aging of a company's accounts receivable indicates that $13,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

debit to Bad Debt Expense for $11,800.

Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited

when an account is determined to be uncollectible

Bad Debt Expense is reported on the income statement as

an operating expense.

A company purchased land for $80,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at

$92,000.

A factory machine was purchased for HK$175,000 on January 1, 2020. It was estimated that it would have a HK$35,000 residual value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. The company ran the machine for 4,000 actual hours in 2020. If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2020 would be

HK$14,000.

On October 1, 2020, Holt Company places a new asset into service. The cost of the asset is €160,000 with an estimated 5-year life and €40,000 residual value at the end of its useful life.

What is the book value of the plant asset on the December 31, 2020, statement of financial position assuming that Holt Company uses the double-declining-balance method of depreciation?

€144,000

Equipment was purchased for €300,000. Freight charges amounted to €14,000 and there was a cost of €40,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a €60,000 residual value at the end of its 5-year useful life. Depreciation
expense each year using the straight-line method will be

€58,800.

On July 1, 2020, Hale Kennels sells equipment for $105,000. The equipment originally cost
$300,000, had an estimated 5-year life and an expected residual value of $50,000. The
accumulated depreciation account had a balance of $200,000 on January 1, 2020, using the
straight-line method. The gain or loss on disposal is

$30,000 gain.