Question 1*

Stengel Company sells a snowboard, White-Out, that is popular with snowboard enthusiasts. Presented below is information relating to Stengel Company's purchases of White-Out snowboards during September. During the same month, 124 White-Out snowboards were sold at $160 each. Stengel Company uses a periodic inventory system.

DateExplanationUnitsUnit CostTotal Cost

Sept. 1Inventory25$ 100$2,500

Sept. 12Purchases451064,770

Sept. 19Purchases241102,640

Sept. 26Purchases501125,600

Total 144$15,510

Instructions

(a) Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO method.

(b) What is gross profit under each method?

Question 2*

The ledger of Maxx Company at the end of the current year shown Accounts Receivable $170,000, Sales Revenue $1,200,000, and Sales Returns and Allowances $50,000.

Instructions

(a)If allowance for Doubtful account has a credit balance of $3,500 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of account receivable.

(b)If allowance for Doubtful Accounts has a debit balance of $370 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 6% of accounts receivable.

Question 3*

The Hartley Clinic purchased a new surgical laser for $90,000. The estimated salvage value is $5,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours. It was used 1,600 hours in year 1; 2,200 hours in year 2; 2,400 hours in year 3; 1,800 hours in year 4; 2,000 hours in year 5.

Instructions

(a)Compute the annual depreciation for each of the five years under each of the following methods:

(1)straight-line.

(2)units-of-activity.

(b)If you were the administrator of the clinic, which method would you deem as most appropriate? Justify your answer.

.How is a gain or loss on the sale of a plant asset computed?