AC 5230 Problem Set 2

Instructions:
Create a single Excel document with one worksheet/tab for each problem. Each
problem is worth 20 points.
Problem 1
On February 1, 2007, York Contractors agreed to construct a building at a contract
price of $6,000,000. York estimated total construction costs would be $4,000,000
and the project would be finished in 2009. Information relating to the costs and
billings for this contract is as follows:
2007
2008
2009
Total costs incurred to date
Estimated costs to complete
Customer billings to date
Collections to date

$1,500,00
0
2,500,000
2,200,000
2,000,000

$2,640,00
0
1,760,000
4,000,000
3,500,000

$4,600,00
0
-05,600,000
5,500,000

Directions (20 Points): Fill in the correct amounts on the following schedule. For
percentage-of-completion accounting and for completed-contract accounting, show
the gross profit that should be recorded for 2007, 2008, and 2009. Create your
response on a separate Excel spreadsheet as directed on the Problem Set 2
instructions.

2007
2008
2009

Percentage of
Completion
Gross Profit
-------------------------------------------------------------------------------

2007
2008
2009

CompletedContract
Gross Profit
-------------------------------------------------------------------------------

Problem 2
Part A (Part A and B are worth 20 Points all together):
Wells Company has a beginning inventory in year one of $300,000 and an ending
inventory of $363,000. The price level has increased from 100 at the beginning of
the year to 110 at the end of year one. Calculate the ending inventory under the
dollar-value LIFO method.

Prepare your response on a separate Excel spreadsheet as directed on the Problem

Set 2 instructions.
Part B:
At the end of year two, Wells' inventory is $437,000 in terms of a price level of 115
which exists at the end of year two. Calculate the inventory at the end of year two
continuing the use of the dollar-value LIFO method.
Prepare your response on a separate Excel spreadsheet as directed on the Problem
Set 2 instructions.

Problem 3
The December 31, 2008 inventory of Dwyer Company consisted of four products, for
which certain information is provided below.
Replacement
Product Original Cost

Cost

Estimated

Expected

Disposal Cost

Selling Price

Normal Profit
on Sales

$25.00

$22.00

$6.50

$40.00

20%

$42.00

$40.00

$12.00

$48.00

25%

$120.00

$115.00

$25.00

$190.00

30%

$18.00

$15.80

$3.00

$26.00

10%

Directions (20 points) Using the lower-of-cost-or-market approach applied on an

individual-item basis, compute the inventory valuation that should be reported for
each product on December 31, 2008. Prepare your response on a separate Excel
spreadsheet as directed on the Problem Set 2 instructions.

Problem 4
Flynt Company was formed on December 1, 2007. The following information is
available from Flynt 's inventory record for Product X.
Units
Unit Cost
January 1, 2008 (beginning inventory)

1,600

$18.00

Purchases:
January 5, 2008

2,600

$20.00

January 25, 2008

2,400

$21.00

February 16, 2008

1,000

$22.00

March 15, 2008

1,800

$23.00

A physical inventory on March 31, 2008, shows 2,500 units on hand.

Directions (20 Points): Prepare schedules to compute the ending inventory at March
31, 2008, under each of the following inventory methods: Prepare your response on
a separate Excel spreadsheet as directed on the Problem Set 2 instructions.
(a) FIFO.
(b) LIFO.
Show supporting computations in good form.

Problem 5
A machine cost $500,000 on April 1, 2008. Its estimated salvage value is $50,000
and its expected life is eight years.
Directions (20 Points):
Calculate the depreciation expense (to the nearest dollar) by each of the following
methods, showing the figures used on a separate Excel spreadsheet as directed on
the Problem Set 2 instructions.
a) Straight-line for 2008
b) Double-declining balance for 2009