1-    FIFO and LIFO inventory methods.

During June, the following changes in inventory item 27 took place:

      June     1          Balance                        1,400 units @ $36

                  14        Purchased                       800 units @ $54

                  24        Purchased                       700 units @ $45

                  8          Sold                                400 units @ $75

                  10        Sold                             1,000 units @ $60

                  29        Sold                                500 units @ $66

Perpetual inventories are maintained.

Instructions

What is the cost of the ending inventory for item 27 under the following methods? (show calculations)

(a)   FIFO.

(b)  LIFO.

1-    Lower-of-cost-or-market.

Determine the proper unit inventory price in the following independent cases by applying the

lower of cost or market rule.

Circle your choice.

Cost

Net realizable value

Net realizable value less normal profit

Market replacement cost

2-    Lower-of-cost-or-market

The December 31, 2017 inventory of Gwynn Company consisted of four products, for which certain information is provided below.

                                                Replacement       Estimated            Expected           Normal Profit

Product            Original Cost         Cost           Disposal Cost     Selling Price           on Sales

   A                  $24.00                 $22.00            $6.50                   $40.00                    20%

   B                  $42.00                 $40.00            $10.00                 $48.00                    25%

   C                  $120.00               $115.00          $25.00                 $190.00                  30%

   D                  $19.00                 $15.80            $4.00                   $26.00                    10%

Instructions

Using the lower-of-cost-or-market approach applied on an individual-item basis, compute the inventory valuation that should be reported for each product on December 31, 2017.

1-    Relative sales value method.

Doran Realty Company purchased a plot of ground for $1,900,000 and spent $4,100,000 in developing it for building lots. The lots were classified into Highland, Midland, and Lowland grades, to sell at $120,000, $90,000, and $60,000 each, respectively.

Instructions

Complete the table below to allocate the cost of the lots using a relative sales value method.

            No. of              Selling             Total                % of                Apportioned cost

Grade    Lots              Price                Revenue          Total Sales       Total                Per Lot

Highland   20              $                      $                                              $                      $

Midland    40               $                                                                                              $

Lowland   100            $                      _______                                  _______          $

                 160                                   $_______                                $_______

2-    A major difference between GAAP and IFRS with respect to accounting for inventories pertains to:

a.     Guidelines on ownerships of goods.

b.     Costs to include in inventories.

c.     The use of LIFO cost flow assumption.

d.     The use of LCNRV.

1-    Calculate depreciation.

A machine which cost $500,000 is acquired on October 1, 2017. Its estimated salvage value is $40,000 and its expected life is eight years.

Instructions

(1)  Calculate depreciation expense for 2017 and 2018 by each of the following methods, showing the figures used.

(a)   Double-declining balance

(b)  Sum-of-the-years’-digits

(2)  At the end of 2018, which method results in the larger accumulated depreciation amount?

2-     Calculate depreciation.

A machine cost $900,000 on April 1, 2017. Its estimated salvage value is $90,000 and its expected life is eight years.

Instructions

(1)  calculate the depreciation expense (to the nearest dollar) by each of the following methods, showing the figures used.

(a)   Straight-line for 2017

(b)   Double-declining balance for 2018

(c)    sum-of-the-years’-digits for 2018

(2)  which method would result in the smallest income amount for 2018?

1-    The following costs are incurred during the research and development phases of a laser bone scanner

Laboratory research aimed at discovery of new knowledge                      $800,000

Search for application of new research findings                                          400,000

Salaries of research staff designing new laser bone scanner                    1,200,000

Material, labor and overhead costs of prototype laser scanner                   850,000

Costs of testing prototype and design modifications                                  450,000

Engineering costs incurred to advance the laser scanner to full                  700,000

Production stage (technological feasibility reached)

Identify which of these are development phase item and will be immediately expensed under GAAP and IFRS

GAAP                         IFRS    

a.          $1,200,000                   $1,200,000

b.          $2,400,000                   $1,400,000

c.          $2,400,000                   $2,500,000

d.          $3,200,000                   $2,500,000