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Li Corp. had a very successful year in 2013, selling 4,500 units of its product. The product sells for $30.00 each.
Units Cost per Unit inventory Per
total cost unit
Beginning Inventory 1,800 $19 34200 19
Purchases by quarter:
Q1 1,000 $18 18000 18.64
Q2 1,500 $16 24000 17.72
Q3 750 $14 10500 17.17
Q4 1,000 $12 12000 16.314
Required:
a) Calculate the cost of goods sold and ending inventory for 2013 using the following inventory costing methods:
Question 2 (12 marks)
Fred’s Manufacturing purchased equipment in 2013 and incurred the following costs relating to the equipment during 2013:
a) List price of equipment was $10,000 but Fred received a $500 discount
b) Shipping costs of $250 to ship the equipment to Fred’s plant
c) Taxes that are fully recoverable from the government of $1,200
d) An engineer’s costs to install the equipment of $700
e) Regular monthly maintenance and cleaning of the equipment of $80
Required: Calculate the capitalized cost of the equipment that would be included on the balance sheet of Fred Manufacturing. Show all calculations.
On March 1, 2013, ABC Co. sold a truck in his fleet for $2,500 cash. The truck has an original cost of $20,000 and accumulated depreciation of $15,000 at December 31, 2012. ABC completes adjusting entries annually. Annual depreciation for the truck is $3,600.
Required: Record the journal entries required on March 1 for the disposal of the truck.
Question 4 (30 marks)
Smith Co. purchased a piece of equipment on January 1, 2013 with a cost of $40,000. The equipment will last four years with a residual value of $3,000. The equipment is expected to produce the following number of units for the company:
2013 500 units
2014 800 units
2015 900 units
2016 700 units
Required: Calculation the depreciation expense for 2013, 2014, 2015, and 2016 for each of the following depreciation methods (show all calculations):
a) Straight-line 2013: $9,250 2014: $9,250 2015: $9,250 2016: $9,250 (37,000/4)
Question 5 (13 marks)
On January 1, 2013 XYZ Co. has machinery with a cost of $12,000 and accumulated depreciation of $7,000. On January 1, 2013 XYZ completes a major overhaul of the machinery for $5,500 which increases the life of the machine and its efficiency. The machine will now last 8 more years and then have a residual value of $500.
The company uses the straight-line method of depreciating the machine.
Required: Calculate the 2013 depreciation expense for the machine. Show all calculations.