Exam 8: Accounting for Selected Assets

ABC Ltd purchased an item inventory at a cost of $27 000. The item was damaged during storage. The company could sell the item in its damaged state for $23 000, and in doing so incur selling costs of $1000. The net realisable value of the item of inventory is $23 000.

On 15 July Sammy Corporation's Gross Accounts Receivable had a balance of $2300 and the Allowance for Doubtful Debts had a balance of ($220). A specific account of $80 was written off on 16 July. If no other relevant transactions had taken place, what is the amount of net receivables after the write-off?

Assuming that there are inflationary trends in the economy, the inventory amount shown in the balance sheet, if based on LIFO, would normally be:

Using the weighted-average-cost method, the value of closing inventory is (to the nearest whole $):

On 1 January two years' ago, the local Red Cross affiliate acquired new blood-processing equipment costing $400 000. The equipment has an estimated useful life of 10 years and an estimated residual value of $50 000. After making all necessary calculations and entries on 31 December, what are the accumulated depreciation to date and carrying value of the equipment? (Assume that the straight-line method is used) Accumulated depreciation Carrying value as of As of 31 December 31 December

The cost of non-current assets recognised as being consumed during a fiscal period is:

The time spent by a barrister briefing a client prior to a court hearing would constitute 'work in progress' for the law firm.

Goods that have been through the complete production or assembly cycle and are ready for resale to the customer are finished goods.

Consumable goods for use within the production process are not classified as inventory under current assets in the balance sheet.

A credit sale of a business where the revenue is not collected due to the customer not paying is a bad debt.

On 1 July, Gumi Company purchased equipment at a cost of $22 000. The equipment has an estimated residual value of $3000 and is being depreciated over an estimated useful life of eight years under the reducing-balance method of depreciation, at a rate equal to one-and-a-half times the straight-line depreciation rate. For the six months ended 31 December, Gumi Company had recorded one-half year's depreciation. One full year later, what would be the depreciation expense (rounded to the nearest dollar) on the equipment for the year and what is the written-down book value after this depreciation expense has been charged?

Which of the following methods results in the higher value for cost of goods sold in times of rising inventory prices?

Residual value can be defined as the estimated disposal (sale) value of an asset when it is no longer useful to the entity.

The balance of the accounts receivable balance of XYZ Pty Ltd was $23 000 at the beginning of the financial year ended 30 June and $27 000 at the end of the period. The total credit sales for the company for the financial year was $132 000. Bad debts write-off totalled $5500. What was the total of the cash received from accounts receivable during the year?

The direct write-off method can mean that assets may be overstated in one year and understated the next.

Which inventory measurement method would have the most recent costs in cost of goods sold?

Depreciation is concerned with allocation not valuation.

Gamma Bomber Parts uses the FIFO periodic costing method. The following data are available: The cost of goods sold should be:

When technology is changing rapidly, depreciation of an asset will help maintain an entity's operating capacity.

Depreciation affects profit in which of the following ways?