Individual Assignment 1(20%) -Fundamentals of accounting 2

General Direction
 Copying from others will disqualify your result.
 All your work is by using yours Owen hand writing.
 Summation Date will be held 06/04/2016 E.C
Let summations is not allowed
1. Explain the difference between the terms FOB shipping point and FOB destination.
2. What is a major advantage and a major disadvantage of the specific identification method of
inventory costing?
3. Casey Company has been using the FIFO cost flow method during a prolonged period of
rising prices. During the same time period, Casey has been paying out all of its net income
as dividends. What adverse effects may result from this policy?
4. Ruthie Stores has 20 toasters on hand at the balance sheet date. Each cost $27. The current
replacement cost is $30 per unit. Under the lower-of-cost-or-market basis of ac-counting for
inventories, what value should Ruthie report for the toasters on the balance sheet? Why?
5. How does the average-cost method of inventory costing differ between a perpetual
inventory system and a peri- odic inventory system?
6. When is it necessary to estimate inventories?
7. Milo Shoe Shop had goods available for sale in 2012 with a retail price of $120,000. The
cost of these goods was $84,000. If sales during the period were $80,000, what is the ending
inventory at cost using the retail inventory method?
8. In its first month of operations, sofumer Company made three purchases of merchandise in
the following sequence: (1) 300 units at $6, (2) 400 units at $7, and (3) 200 units at $8.
Assuming there are 400 units on hand, and 100 from each last purchases. Then compute the
cost of the ending inventory under the (a) FIFO method (b) average-cost method and unit
specification method. Sofumer uses a periodic inventory system.

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9. Venden Camera Shop uses the lower-of-cost-or-market basis for its inventory. The
following data are available at December 31.
Item Units Unit Cost Market
Cameras:
Minolta 5 $170 $156
Canon 6 150 152
Light meters:
Vivitar 12 125 115
Kodak 14 120 135
Instructions
Determine the amount of the ending inventory by applying the lower-of-cost-or-market basis.

10. Walashe company. is a retailer operating in Bale Robe Ethiopia. Walashe uses the
perpetual inventory method. All sales returns from customers result in the goods being
returned to inventory; the inventory is not damaged. Assume that there are no credit
transactions; all amounts are settled in cash. You are provided with the following
information for Ticotin Inc. for the month of January 2022.

Unit Cost or
Date Description Quantity Selling Price
January 1 Beginning inventory 100 $15
January 5 Purchase 150 18
January 8 Sale 110 28
January 10 Sale return 10 28
January 15 Purchase 55 20
January 16 Purchase return 5 55
January 20 Sale 80 32
January 25 Purchase 30 22
Instructions
(a) For each of the following cost flow assumptions, calculate (i) cost of goods sold, (ii)
ending inventory, and (iii) gross profit.
(1) LIFO. (2) FIFO. (3) Moving-average cost.
(b) Compare results for the three cost flow assumptions.

11. Depreciation is a process of asset valuation, not cost allocation.

12. Depreciation provides for the proper matching of expenses with revenues.
13. The book value of a plant asset should approximate its fair value.
14. Depreciation applies to three classes of plant assets: land, buildings, and equipment.
15. Depreciation does not apply to a building because its usefulness and revenue-producing
ability generally remain intact over time.

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16. The revenue-producing ability of a depreciable asset will decline due to wear and tear and to
obsolescence.
17. Recognizing depreciation on an assetresults in an accumulation of cash for replacement of
the asset.
18. The balance in accumulated depreciation represents the total cost that has been charged to
expense.
19. Depreciation expense and accumulated depreciation are reported on the income statement.
20. Four factors affect the computation of depreciation: cost, useful life, salvage value, and
residual value.
Instructions
For question 11- 20 Identify each statement as true or false. If false, indicate how
to correct the statement.
21. in recent years, Robe Transportation authority purchased three used buses. Because of
frequent turnover in the accounting department, a different accountant selected the
depreciation method for each bus, and various methods were selected. Information
concerning the buses is summarized blow.
Salvage Useful Life
Bus Acquired Cost Value in Years Depreciation
Method
1 1/1/10 $ 96,000 $ 6,000 5 Straight-line
2 1/1/10 120,000 10,000 4 Declining-
balance
3 1/1/11 80,000 8,000 5 Units-of-
activity
For the declining-balance method, the company uses the double-declining rate. For the
units-of- activity method, total miles are expected to be 120,000. Actual miles of use in
the first 3 years were: 2011, 24,000; 2012, 34,000; and 2013, 30,000.
Instructions
(a) Compute the amount of accumulated depreciation on each bus at December 31, 2012.
(b) If bus no. 2 was purchased on April 1 instead of January 1, what is the depreciation
expense
for this bus in (1) 2010 and (2) 2011?
22. BOLE Company and Felicity’s Express Delivery exchanged delivery trucks on January 1,
2022. Bole’s truck cost $22,000. It has accumulated depreciation of $15,000 and a fair value
of $4,000. Felicity’s truck cost $10,000. It has accumulated depreciation of $8,000 and a fair
value of $4,000. The transaction has commercial substance.
Instructions
(a) Journalize the exchange for Bole’s Delivery Company.
(b) Journalize the exchange for Felicity’s Express Deliver