Question

Question Number 1:

A perpetual Inventory System is used by Black Hawk, Inc. The following transactions show beginning inventory, purchases and sales of CT-300, a cellular telephone for the month of May:

May   1: Balance on hand, 20 units, cost $50 each         $1000

May   5: Sale, 10 units, sale price $80 each                    $ 800

May   6: Purchase, 20 units, cost $60 each                     $1200

May 21: Sale, 15 units, Sale Price $100 each                 $1500

Instruction:

Record beginning inventory, purchases, cost of goods sold and running balance on an inventory subsidiary record using Average Cost method.

Question Number 2:

On January 1, 2019, Delta Company acquired new equipment with an estimated useful life of 5 years. Cost of the equipment was $5,000,000 with a residual value of $250,000. For income tax purposes, this machinery qualifies as 5-Year property.

3 Years	Year 1	Year 2	Year 3	Year 4
MACRS Rates	33.33%	44.45%	14.81%	7.41%

Instructions

Compute the amounts of depreciation recognized in each of first 4 years (2019, 2020 & 2021) under each of the depreciation methods listed below.

1. Straight Line Method
2. MACRS Method

Question Number 3:

On October 30, 2019, Afghan United Bank has purchased a brand new generator from a company at USA. The new generator has an invoice price of $5,000,000. Sales tax was computed at 12% of invoice price. Afghan United Bank has paid $100,000 as shipping cost to get generator from USA. After the generator arrives, installation cost of $150,000 is incurred, along with $50,000 testing costs. Compute the cost of generator and prepare journal entry to record purchase of generator.

Question Number 4:

During the fiscal year 2019, Alpha Corporation carried out the following transactions involving notes payable:

Feb. 1:              Borrowed $550,000 from Sun National Bank at an interest rate of 15% per annum,

signed a six month note payable.

July 31:            Paid Sun National Bank note plus accrued interest.

Instruction:

Prepare journal entries to record above transactions.

Question Number 5:

King Burger is a fast food restaurant operating as partnership firm of four individuals. The partners agree to share profit equally. The information regarding current year is as follows:

                  Watson            Taylor             Hayden               Dravid

Capital             $550,000          $600,000          $500,000             $650,000

Drawing           150,000          150,000          100,000               200,000           

Net income for the year amounted to $2,500,000.

Instructions:

1. How much must each of four partners report income on his income tax return?
2. Prepare Statement of Partner’s Equity for current year ended Dec 31, 2019?

Answer 1

Date	Beginning Inventory	Purchases	Sales	Closing Inventory
Units	Unit Cost	Total	Units	Unit Cost	Total	Units	Unit Cost	Total	Units	Unit Cost	Total
01-May	20	$50	$1,000							20	$             50	$   1,000
05-May	20	$50	$1,000				10	$     50	$     500	10	$             50	$      500
06-May	10	$50	$   500	20	$     60	$ 1,200				10	$             50	$      500
										20	$             60	$   1,200
										30	$             57	$   1,700
21-May	30	$57	$1,700				15	$     57	$     850	15	$             57	$      850
31-May	15	$57	$   850							15	$             57	$      850
		Cost of Goods Sold
			05-May							10	$             50	$      500
			21-May							15	$             57	$      850
			Total COGS (Unit cost = $1350/25units)			25	$             54	$   1,350