NAME:_________________

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BUS 321 - Intermediate Financial Accounting 1

Burnett – Fall Quarter 2013

Exam 1

This exam is scheduled to be 110 minutes long. Please make sure you have 7 pages

including this page. Do not start working on this exam until instructed to do so. This is a

closed book, closed notes exam. The use of any electronic device other than a dedicated

calculator (i.e., any device that performs functions other than arithmetic operations)

constitutes unauthorized assistance. Students found to be in possession of such a device

during the exam will be given a score of zero.

Inventory

17. WHAT’S INCLUDED IN INVENTORY? The Tucson Corporation's fiscal year ends on December

31. Tucson determines inventory quantity by a physical count of inventory on hand at the

close of business on December 31. The company's controller has asked for your help in

deciding if the following items should be included in the ending inventory. Please state next

to each item include or exclude.

1. Goods purchased from a vendor shipped f.o.b. shipping point on December 24 that arrived

on January 4.

2. Goods shipped f.o.b. shipping point on December 27 arrived at the customer's location on

January 4.

3. Goods purchased from a vendor shipped f.o.b. destination on December 27 that arrived on

January 5.

4. Freight charges on goods purchased in 3.

5. Merchandise held on consignment for Masterwear, Inc.

18. LOWER OF COST OR MARKET

US GAAP requires inventory to be valued at the lower of cost or market (LCM). Why?

Please explain what the floor is in LCM and why it exists?

PURCHASES – GROSS METHOD - PERPETUAL INVENTORY SYSTEM On July 3rd

, 2013 BURNETT

MOTOR CO. purchased merchandise with an invoice price of $50,000 having terms 2/10 n/60

fob destination. The supplier shipped the merchandise on July 4th

. We receive the merchandise

on July 5th

. Prepare the following three entries:

19. Prepare the entry to record the purchase with the correct date (xx/xx/2013).

20. On July 10th

we return goods having an invoice price of $12,000.

PURCHASES – NET METHOD - PERIODIC INVENTORY SYSTEM On July 3rd

, 2013 BURNETT

MOTOR CO. purchased merchandise with an invoice price of $50,000 having terms

2/10 n/60 fob shipping point. The supplier shipped the merchandise on July 4th

. We receive

the merchandise on July. 5th

. Prepare the following three entries:

21. Prepare the entry to record the purchase with the correct date (xx/xx/2013).

22. On July 12h when we write a check for $15,000 to pay on our account.

23. On July 29th

when we write a check to pay the remaining balance in or account.

COST FLOW ASSUMPTIONS - PERIODIC BURNETT MOTOR CO. sold 80 units for $25 each.

Use the following information for the next two problems:

qty cost

beginning 15 15.00 225

purchase 30 13.00 390

purchase 55 12.00 660

available 100 1,275

sold 80

inventory 20

24. Prepare the closing entry, using Average Cost / Periodic to calculate Cost of Goods Sold and

ending Inventory.

25. Use LIFO - Periodic to calculate Cost of Goods Sold and ending Inventory.

COST FLOW ASSUMPTIONS - PERPETUAL Use the information presented below to for the next

two problems:

Purchases Sales

Qty Cost qty price

2-Jan 10 15 1504-Jan 5 20

14-Jan 35 13 45515-Jan 25 2024-Jan 20 12 240

28-Jan 10 20

26. FIFO - PERPETUAL. Calculate Cost of Goods Sold for the month using FIFO perpetual.

27. LIFO - PERPETUAL. Calculate Ending Inventory using LIFO perpetual.

28. LOWER OF COST OR MARKET Calculate Market for each of the products in the following

table

A1 A2 B11 B12

Selling price 50 50 50 50

Normal profit 16 18 18 20

Direct selling costs 10 5 5 0

Replacement cost 20 46 28 28

MARKET (fill in)

part no qty cost market

101 20 85.00 88.00

201 12 75.00 70.00

301 15 65.00 55.00

401 10 55.00 57.00

29. LOWER OF COST OR MARKET Use the information in the above table to calculate Lower of

Cost or Market on an item by item basis. What amount is total ending inventory?