Chapter 4 Homework Assignment:
Exercise 1 on page 154
Inventory
of Product Z at Monroe Company
Information
for inventory of Product Z on hand on December 31, Year 1
Historical
cost $20,000
Replacement
cost $14,000
Estimated
selling price $17,000
Estimated
costs to complete and sell $ 2,000
Normal
profit margin as % of selling price 20%
The entire
inventory was sold at a price of $17,150 and the selling cost was $1,800.
a)
Determine the impact of
the accounting for inventories on Year 1 and Year 2 income related to Product Z
b)
Summarize the difference
in income, total assets, and total stockholders’ equity using the two different
sets of accounting rules over the two-year period.
Problem 3 on page 155
Jefferson
Company acquired equipment on January 2, Year 1 at $10 million with a five-year
life (straight-line basis). The company determines the fair value of the asset
(net of any accumulated depreciation) to be $12 million on January 2, Year 2.
a)
Determination of the impact
the equipment gas on Jefferson Company’s income in Years 1-5.
b)
Summarize the difference
in income, total assets, and total stockholders’ equity using the two different
sets of accounting rules over the period Year 1 – Year 5.
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