CPA PROBLEMS ACCT 460
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This 3 page Class Notes was uploaded by Tabitha Mertz DVM on Wednesday September 30, 2015. The Class Notes belongs to ACCT 460 at Western Kentucky University taught by Jack Hall in Fall. Since its upload, it has received 47 views. For similar materials see /class/216732/acct-460-western-kentucky-university in Accounting at Western Kentucky University.
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Date Created: 09/30/15
Instructor Dr Hall Accounting 460 Estimated time CPA Problems 5060 minutes Handout Problem No F143 This problem consists of three unrelated parts Part A On June 30 1978 a flash flood damaged the warehouse and factory of Padway Corporation completely destroying the workinprocess inventory There was no damage to either the raw materials or finished goods inventories A physical inventory taken after the flood revealed the following valuations Raw materials 62000 Work in process Finished goods 119000 The inventory on January 1 1978 consisted of the following Raw materials 30000 Work in process 100000 Finished goods 140 000 270 000 A review of the books and records disclosed that the gross profit margin historically approximated 25 of sales The sales for the first six months of 1978 were 340000 Raw material purchases were 115000 Direct labor costs for this period were 80000 and manufacturing overhead has historically been applied at 50 of direct labor Reguired Compute the value ofthe workinprocess inventory lost at June 30 1978 Show supporting computations in good form Part B The Supreme Clothing Store values its inventory under the retail inventory method at the lower or cost or market The following data are available for the month of November 1978 Cost Selling Price Inventory November 1 53800 80000 Markdowns 21000 Markups 29000 Markdown cancellations 13000 Markup cancellations 9000 Purchases 173200 223600 Sales 244000 Purchase returns and allowances 3000 3600 Sales returns and allowances 12000 Reguired Based upon the data presented above prepare a schedule in good form to compute the estimated inventory at November 30 1978 at the lower of cost or market under the retail inventory method Handout Problem No F143 continued p 2 Part C The Acute Company manufactures a single product On December 31 1975 Acute adopted the dollar value LIFO inventory method The inventory on the date using the dollarvalue LIFO inventory method was determined to be 300000 Inventory data for succeeding years are as follows Relevant Price Index Inventory at quot quot base year 1975 Year Ended December 31 YearEnd Prices 1976 363000 110 1977 420000 120 1978 430000 125 Reguired Compute the inventory amounts at December 31 1976 1977 and 1978 using the dollarvalue LIFO inventory method for each year Instructor Dr Hall Accounting 460 Estimated time CPA Problems 5060 minutes Handout Problem No C35 You are engaged in the audit of the December 31 1978 financial statements of Spirit Corporation a manufacturer of a digital watch You are attempting to verify the costing of the ending inventory of work in process and finished goods which were recorded on Spirit s books as follows Units Cost Work in process 50 complete as to labor and overhead 300000 660960 Finished goods 200000 1009800 Materials are added to production at the beginning of the manufacturing process and overhead is applied to each product at the rate of60 ofdirect labor costs There was no finished goods inventory on January 1 1978 A review of Spirit s inventory cost records disclosed the following information Costs Units Materials Labor Work in process January 1 1978 80 complete as to labor and overhead 200000 200000 315000 Units started in production 1000000 Material costs 1300000 Labor costs 1995000 Units completed 900000 Reguired 9 Prepare schedules as of December 31 1978 to compute the following Equivalent units of production using the weightedaverage method Unit costs of production of materials labor and overhead Costing ofthe finished goods inventory and workinprocess inventory 37 Prepare the necessary journal entry to correctly state the inventory of finished goods and work in process assuming the books have not been closed Ignore income tax considerations
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