Question 1: (5 Marks)
Question 1: (5 Marks)
During June, the following changes in inventory took place:
June1Balance1,400 units @SR 24
14Purchased900 units @36
24Purchased700 units @30
8Sold400 units @50
10Sold1,000 units @40
29Sold500 units @44
Perpetual inventories are maintained in units only.
Instructions
What is the cost of the ending inventory under the following methods?(Show calculations.)
(a)FIFO.
(b)Average Cost.
Question 2: (5 Marks)
A Company began operations in 2020 and determined its ending inventory at cost and at a LCNRV at December 31, 2020, and December 31, 2021. This information is presented below.
CostNet Realizable Value
31/12/20 SR 520,000SR 485,000
31/12/21615,000585,000
Instructions
(a)Prepare the journal entries required at December 31, 2020, and December 31, 2021, assuming that the inventory is recorded at LCNRV, using a perpetual inventory system and the cost-of-goods-sold method.
(b) Prepare the journal entries required at December 31, 2020, and December 31, 2021, assuming that the inventory is recorded at cost, using a perpetual system and the loss method.
(c)Which of the two methods above provides the higher net income in each year?
Question 3:(5 Marks)
On March 1, a Company began construction of a small building. The following expenditures were incurred for construction:
March 1SR75,000April 1SR74,000
May 1180,000June 1270,000
July 1100,000
The building was completed and occupied on July 1. To help pay for construction SR50,000 was borrowed on March 1 on a 12%, three-year note payable. The only other debt outstanding during the year was a SR500,000, 10% note issued two years ago.
Instructions
(a)Calculate the weighted-average accumulated expenditures.
(b)Calculate avoidable interest.
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