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Exercise On Inventory and Plant Assets

The document discusses inventory costing methods and plant asset accounting. It provides examples to calculate ending inventory and cost of goods sold under FIFO, LIFO, and weighted average methods for both periodic and perpetual inventory systems. It also discusses depreciation of plant assets, capital expenditures, calculating depreciation expense under double-declining balance method, and determining gain or loss on disposal of assets. Multiple choice questions are provided to test understanding of inventory costing, depreciation, and asset accounting concepts.

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Abebu Mesfin
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51 views

Exercise On Inventory and Plant Assets

The document discusses inventory costing methods and plant asset accounting. It provides examples to calculate ending inventory and cost of goods sold under FIFO, LIFO, and weighted average methods for both periodic and perpetual inventory systems. It also discusses depreciation of plant assets, capital expenditures, calculating depreciation expense under double-declining balance method, and determining gain or loss on disposal of assets. Multiple choice questions are provided to test understanding of inventory costing, depreciation, and asset accounting concepts.

Uploaded by

Abebu Mesfin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Exercise on Inventory and plant assets

1. There was Beginning Inventory of 10units at $120 per unit. In addition, the following
units were purchased. 40units $125each, 50 units at $130 each and 40 units at $132 each.
There were 90 units at the end of the period. Compute the cost of ending inventory and
the cost of merchandise sold under periodic inventory using
A. The FIFO method
B. The LIFO method
C. The weighted Average method
2.

3. Merchandise inventory at the end of the year was inadvertently overstated. Which of the
following statements correctly states the effect of the error on net income, assets and
owner’s equity?
A. Net income is overstated, assets are overstated, owners’ equity is overstated.
B. Net income is overstated, assets are overstated, owners’ equity is understated.
C. Net income is understated, assets are understated, owners’ equity is understated.
D. Net income is understated, assets are understated, owners’ equity is overstated.
4. Under which method of cost flows is the inventory assumed to be composed of the most
recent costs?
A. Average cost
B. Airst-in, first-out
C. Last-in, first-out
D. Weighted average
Akmel Company just started business in August and they use the periodic inventory system.
They made the following purchases during August:
August 01 300 units $1,560 total cost
August 12 400 units 2,340 total cost
August 24 400 units 2,520 total cost
August 30 300 units 1,980 total cost. Assume the ending inventory consists of 500 units, answer
questions 5-7
5. Cost of Ending inventory and cost of goods sold using FIFO method
6. Cost of Ending inventory and cost of goods sold using LIFO method
7. Cost of Ending inventory and cost of goods sold using Weighted Average method

***Chole, Inc. uses perpetual inventory procedures and made the following sales and purchases
during the month of September:
September 1 Balance 200 units $150/unit

1
September 5 Sold 110 units
September 8 Purchased 400 units $155/unit
September 10 Sold 320 units
September 15 Purchased 400 units $160/unit
September 20 Sold 240 units
September 25 Sold 230 units
September 30 Purchased 300 units $165/unit. Answer questions 8-10 using perpetuasl
inventory system

8. Compute the cost of ending inventory and Cost of goods sold using FIFO
9. Compute the cost of ending inventory and Cost of goods sold using LIFO
10. Compute the cost of ending inventory and Cost of goods sold using Moving Average
method
11. Depreciation is a process of:
A. valuation.
B. cost allocation.
C. cash accumulation.
D. appraisal.
12. Additions to plant assets are
A. revenue expenditures.
B. debited to the Maintenance and Repairs Expense account.
C. debited to the Purchases account.
D. capital expenditures.
13. Bennie Razor Company has decided to sell one of its old manufacturing machines on
June 30, 2012. The machine was purchased for $80,000 on January 1, 2008, and was
depreciated on a straight-line basis for 10 years assuming no salvage value. If the
machine was sold for $26,000, what was the amount of the gain or loss recorded at the
time of the sale?
14. Jefferson Company purchased a piece of equipment on March 18, 2012. The equipment
cost $60,000 and has an estimated life of 8 years and a salvage value of $8,000. What
was the depreciation expense for the asset for 2014 under the double-declining-balance
method?
15. What will be the gain or loss on disposal if the asset was sold for $ 42,000?

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