Question

In: Accounting

1a. Depot Company had 10 tons of sand in inventory on January 1, 2017 valued at...

1a. Depot Company had 10 tons of sand in inventory on January 1, 2017 valued at $70 per ton. On February 1, 2017 it acquired 20 tons valued at $80 per ton and an additional 30 tons at $100 a tons on March 1, 2018. On June 1 it made its only sale of sand for the year amounting to 40 tons.

What was the ending inventory and cost of goods sold value for the sand that should be recorded in 2017 using the average cost, FIFO and LIFO methods?

1b. Depot Company acquired a bulldozer for $40,000 on January 1, 2017. Additional ordinary and necessary costs to install the bulldozer for service include: $600 sales tax; $400 delivery charge. The bulldozer has an estimated useful life of 10 years and a salvage value of $1,000.

What entry would Depot make to record depreciation expense on December31, 2017 using the straight line and the double declining depreciation methods?

Solutions

Expert Solution

  • All working forms part of the answer
  • Requirement 1: Cost of ending Inventory

Ending Inventory

FIFO

$             2,000.00

LIFO

$             1,500.00

Average

$             1,766.67

--Working

FIFO

Cost of Goods available for sale

Cost of Goods Sold

Ending Inventory

Units

Cost/unit

COG for sale

Units sold

Cost/unit

COGS

Units

Cost/unit

Ending inventory

Beginning Inventory

10

$                70.00

$                            700.00

10

$         70.00

$              700.00

0

$        70.00

$                         -  

Purchases:

01-Feb

20

$                80.00

$                        1,600.00

20

$         80.00

$           1,600.00

0

$        80.00

$                         -  

01-Mar

30

$              100.00

$                        3,000.00

10

$       100.00

$           1,000.00

20

$      100.00

$            2,000.00

TOTAL

60

$                        5,300.00

40

$           3,300.00

20

$            2,000.00

LIFO

Cost of Goods available for sale

Cost of Goods Sold

Ending Inventory

Units

Cost/unit

COG for sale

Units sold

Cost/unit

COGS

Units

Cost/unit

Ending inventory

Beginning Inventory

10

$                70.00

$                            700.00

0

$         70.00

$                        -  

10

$        70.00

$                700.00

Purchases:

0

$                       -  

$                                     -  

01-Feb

20

$                80.00

$                        1,600.00

10

$         80.00

$              800.00

10

$        80.00

$                800.00

01-Mar

30

$              100.00

$                        3,000.00

30

$       100.00

$           3,000.00

0

$      100.00

$                         -  

TOTAL

60

$                        5,300.00

40

$           3,800.00

20

$            1,500.00

Weighted Average (Periodic)

Units

Cost per unit

Total

Beginning Inventory

10

$    70.00

$           700.00

Purchases:

01-Feb

20

$    80.00

$       1,600.00

01-Mar

30

$ 100.00

$       3,000.00

16-Apr

0

$           -  

$                    -  

28-Apr

0

$           -  

$                    -  

Total Purchases

50

$       4,600.00

Goods Available for Sales

60

$       5,300.00

Weighted Average cost per unit

$    88.33

Cost of Goods Sold

40

$    88.33

$       3,533.33

Ending Inventory

20

$    88.33

$       1,766.67

  • Requirement 2: Depreciation expense

--Straight Line Method

Date

Accounts title

Debit

Credit

31-Dec 17

Depreciation expense - Equipment

$        4,000

Accumulated Depreciation - Equipment

$    4,000

(depreciation expense recorded)

---Double declining balance method

Date

Accounts title

Debit

Credit

31-Dec 17

Depreciation expense - Equipment

$        6,150

Accumulated Depreciation - Equipment

$    6,150

(depreciation expense recorded)

--Working

Straight Line

A

Cost

$            41,000.00

B

Residual Value

$             1,000.00

C=A - B

Depreciable base

$            40,000.00

D

Life [in years]

10

E=C/D

Annual SLM depreciation

$              4,000.00

Double declining

A

Cost

$            41,000.00

B

Residual Value

$            10,000.00

C=A - B

Depreciable base

$            31,000.00

D

Life [in years]

10

E=C/D

Annual SLM depreciation

$              3,100.00

F=E/C

SLM Rate

10.00%

G=F x 2

DDB Rate

20.00%

Year

Beginning Book Value

Depreciation rate

Depreciation expense

1

$              41,000.00

20.00%

$            6,150.00


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