Accounting Questions

There are 5 questions below, please answer these questions and show the solutions for each questions.

All of the questions needs to SHOW THE SOLUTIONS.

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P1. The following information pertains to the inventory of Hawk, Inc. during 2018.

Cost Retail

Inventory 1/1/2018 $150,000 $250,000

Net markups 60,000

Net markdowns (20,000)

Purchases 630,000 980,000

Purchase return & allowance (50,000) (80,000)

Freight-in 30,000

Abnormal Spoilage (10,000) (20,000)

Sales (640,000)

Instructions: Compute COGS for 2018 using

1. Conventional average retail method and

1. LIFO retail method.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

P2. The December 31, 2018 inventory of the COYOTE Co. consisted of 3 products, for which the following information is provided.

 

Original Replacement Est. Disposal Selling Normal Profit

Product Cost Cost Cost Price on Sales

A $300 $280 $100 $500 30%

B 400 350 90 600 15

C 500 600 120 700 10

 

Instructions: Using the lower of cost or market approach on an individual item basis,

 

1. Compute the inventory valuation that should be reported for each product on 12/ 31/2018.

1. Prepare any necessary journal entries for inventory on 12/31/2018.

 

 

 

 

 

 

 

 

 

 

 

 

P3. Coyote Manufacturing bought a delivery truck for $60,000 on April 1, 2017. The registration fee for the truck was $4,000. Coyote estimated that the useful life would be four years or 200,000 miles and the residual value at the end of the useful life be $8,000. The mileage to be added to this truck during its useful life are

2017 2018 2019 2020 2021

40,000 50,000 52,000 48,000 10,000

 

Instructions:

1. Prepare journal entries for the purchase of the truck on April 1. 2017.

1. Compute depreciation expenses on the truck for the years ending on December 31 of 2017 and 2018 using the following methods; 1) Straight-line method,

2) Activity-based method,

3) Sum-of-the-years’-digit,

4) Double declining method.

3. Coyote sold this truck for $30,000 on January 1, 2019

– Prepare any necessary journal entries for this sale using

1) the sum-of-years-digit method.

2) the straight-line method.

 

 

 

 

 

 

 

 

 

 

 

 

 

P4. During 2018, the COYOTE Company spent $4,000,000 for various construction projects which are qualified for capitalization of interest. The total expenditures of $4,000,000 were made as follows: $1,000,000 on 1/1/2018, $2,000,000 on 4/1/2018, and $1,000,000 on 10/1/2018. The company had the following debts outstanding as of December 31, 2018:

 

1. 6%, 5-year note to finance construction of various assets, dated January 1, 2017, with interest

payable annually on each January 1. $1,500,000

2. 8%, 15-year bonds issued at par on December 31, 2015, with interest payable annually on each December 31 $2,000,000

3. 10%, 10-year note payable, dated January 1, 2017, with interest payable annually on each

January 1 $4,000,000

Instructions: Prepare the journal entries for the asset qualifying for capitalization of interest, interest expense, and interest payment on December 31, 2018.

 

 

 

 

 

 

P5. The following transactions involving intangible assets of ABC Co. occurred during 2018.

 

1. On 1/1/2018, ABC’s application for the patent (#2) for a new production process was granted. Legal and registration fees for the patent were $40,000. The production process will be useful to ABC for ten years.

1. On 1/1/2018 ABC finally won litigation against its patent #1 after spending $30,000 by the court judgment. The patent #1was purchased at $150,000 on 1/1/20015. The economic useful life of patent #1 is 30 years from its acquisition date.

1. On December 31, 2018, ABC purchased XYZ co. for $2,500,000. XYZ co.’s balance sheet as of December 31, 2018 was as follow;

Book Value Fair market value

Total assets $ 2,200,000 $3,000,000

Total liabilities (800,000) (900,000)

Owners’ equity (1,400,000) (2,100,000)

 

Instructions: Prepare the following journal entries for ABC

 

1) any necessary journal entries for each transaction on the date of transactions.

2) any journal entries to record any resultant amortization of intangible assets on Dec. 31, 2018. If no journal is needed, write no J/E.