 Baruch College – CUNY

Stan Ross Department of Accountancy

Accountancy 3000 - Section TR24 – A

Fall 2003 – Prof. Jan Sweeney

Quiz 4 –Solution

1.      1   100 @ \$48 + 50 @ 46 =\$7,100

2.   100 @ \$42 + 50 @ 44 = \$6,700

2.      \$’000s  Ceiling \$255- \$10 = \$245, Floor \$255 –\$10 – \$30 = \$215

Replacement \$220 is middle value therefore market value

Loss is \$240 - \$220 = \$20

3.    W I P (or Overhead)              \$5,000

Cash                            \$5,000

4 i  70%

ii  \$147,000

5.    Computation of Ending Inventory, 2001

Ending Inventory                 Layers at                                       Ending Inventory

at Base-Year Price                        Base-Year Prices                        Price Index     at Dollar-Value LIFO

\$378,000 ÷ 1.08 = \$350,000         \$300,000                      ×                 1.00                      =       \$300,000

\$50,000                      ×                 1.08                      =           54,000

\$354  00

Bonus

A.         Under FIFO income would have been higher by \$378,00 - \$354,000 = \$24,000

B.         Cash Saved = Tax saved = \$24,000 * 30% = \$7,200

Baruch College – CUNY

Stan Ross Department of Accountancy

Accountancy 3000 - Section TR24 – B

Fall 2003 – Prof. Jan Sweeney

Quiz 4 –Solution

1.      1.              (200*\$42) + (100*\$44) = \$12,800

2.     (200*\$48) + (100*\$46) = \$14,200

2. \$000s

Ceiling \$255- \$10 = \$245, Floor \$255 –\$10 – \$30 = \$215

Replacement \$210, \$215 is middle value therefore market value

Loss is \$240 - \$215 = \$25

3. W I P (or Overhead)                    \$1.6 mill

Accumulated Depreciation                            \$1.6 mill

4. i                60%

ii  \$150,000

5

Computation of Ending Inventory, Year One

Ending Inventory                            Layers at                                             Ending Inventory

at Base-Year Price                Base-Year Prices    Price Index            at Dollar-Value LIFO

\$477,000 ÷ 1.06 = \$450,000      \$400,000 ×           1.00                = \$400,000

\$50,000      ×         1.06                =     53,000

\$453,000

Bonus

A.                             Under FIFO income would have been higher by \$477,000 - \$453,000 = \$24,000

B.                  Cash Saved = Tax saved = \$24,000 * 40% = \$9,600

Baruch College – CUNY

Stan Ross Department of Accountancy

Accountancy 3000 - Section TR24 – C

Fall  2003 – Prof. Jan Sweeney

Quiz 4 –Solution

1. 1.          (90*\$6 + (70*\$5.4) = \$918

2.     (120*\$5) + (40*\$5.4) = \$816

2.                          Ceiling \$47 - \$6 = \$41, Floor \$41 –\$4 = \$37

Replacement \$45.  \$41 is the middle value therefore market value

Loss is \$43 - \$41 = \$2 unit or \$2,000,000 total

3.     (2points)

W I P (or Overhead)              \$4,000

Cash                            \$4,000

6        (8points)

i.        60%

ii.       \$150,000

7..    (8points)

Computation of Ending Inventory, Year One

Ending Inventory                          Layers at                                     Ending Inventory

at Base-Year Price                        Base-Year Prices                        Price Index       Dollar-Value LIFO

\$371,000 ÷ 116 = \$350,000         \$300,000                      ×                 1.00                      =       \$300,000

\$50,000                      ×                 1.06                      =           53,000

\$353,000

Bonus

B.                             Under FIFO income would have been higher by \$371,00 - \$353,000 = \$18,000

B.                  Cash Saved = Tax saved = \$18,000 * 30% = \$5,400