Problem 3. Inventory Cost Flow Assumption: FIFO, LIFO, Average Cost; Periodic & Perpetual Methods

Inventory information for Moby Corporation disclosed the following information for the month of June:

June 1 Balance 450 units @ $11 June 15 Sold 200 units @ $24 11 Purchased 950 units @ $13 15 Sold 575 units @ $25 20 Purchased 525 units @ $14 27 Sold 324 units @ $27

Instructions

3.1 thru 3 Assuming that the periodic inventory method is used, compute the cost of goods sold and ending inventory under (1) LIFO, (2) FIFO, (3) Average Cost.

3.4 thru 6 Assuming that the perpetual inventory method is used and costs are computed at the time of each withdrawal, what is the cost of goods sold and ending inventory under (4) LIFO, (5) FIFO, (6) Average Cost.

3.7Prepare the adjusting journal entries to record cost of goods sold for the month of June for the perpetual inventory method only.

3.8 Explain why LIFO usually produces a lower gross profit than the FIFO method.

Problem 5. Depreciation Methods: Straight-line, Activity, and Double Declining Balance

May Corporation purchased a new machine for production on 1/1/22. The cost of the machine was $200,000. The salvage value was estimated to be $50,000. Its useful life was estimated to be 5 years and its working hours was estimated at 25,000 hours. The hours used 2022 thru 2026 were 5,750, 5,000, 4,250, 5,500, 4,500, respectively. Year-end is December 31^st. Fully depreciate the equipment over the full 5 years.

Instructions: Compute the depreciation expense under each of the following methods below. Record the journal entry for each year to record the depreciation expense.

5.1 Straight-Line method

5.2 Activity method

5.3 Double-Declining Balance method

Problem 9. Effective-Interest Rate Method: Bonds Issued at Premium & Discount

9.1 On Jan. 1, 2023, Moby, Inc. issued $600,000, of 10% bonds, due in 5 years. The bonds pay interest semi-annually on July 1 and January 1. The bonds effective yield 8%. Moby uses the effective-interest method (see PV Tables next page). Prepare Moby's journal entries for a thru c.

1. The January 1 issuance
2. The July 1 interest payment
3. The December 31 adjusting journal entry
4. Prepare a full Bond Amortization Schedule

9.2 On Jan. 1, 2023, Moby, Inc. issued $600,000 of 10% bonds, due in 5 years. The bonds pay interest semi-annually on July 1 and January 1. The bonds effective yield 12%. Moby uses the effective-interest method (see PV Tables next page). Prepare Moby's journal entries for a thru c.

1. The January 1 issuance
2. The July 1 interest payment
3. The December 31 adjusting journal entry
4. Prepare a full Bond Amortization Schedule