1. (TCO 8) It is the end of the accounting period, and your boss asks you to help determine the inventory balance to place in the company’s balance sheet. Explain which physical quantities of inventory you will include, and which you will exclude.
2. (TCO 8) Fulbright Corp. uses the periodic inventory system. During its first year of operation, Fulbright made the following purchases (listed in chronological order of acquisition):
· 40 units at $100
· 70 units at $80
· 170 units at $60
Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year. What is the ending inventory using the average cost method (rounded)?
3. (TCO 4) You are reviewing the December 31, 2012 financial statements of Ellie’s Antiques that is considering an initial public offering of its shares. The following items come to your attention:
a. Included in long-term investments are 10-year U.S. Treasury bonds that mature March 31, 2013. The bonds were purchased November 20, 2012.
b. The property, plant, and equipment account is stated at cost, except that it includes a parcel of land purchased for investment purposes at a cost of $40,000. Because of rising land prices, the value of the land has been written up to $60,000. The company has an independent appraisal that attests to this amount.
c. The accounts receivable account includes $20,000 due in 3 years from officers and employees and a 2-year, 8% note for $25,000 due from a customer. The loan enabled the customer to buy equipment needed to process materials purchased from Ellie’s Antiques.
Please discuss how the above items should be classified and accounted for.