# Abba Medical Supplys

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SHOW WORK BY THE QUESTION TO INDICATE HOW YOU GOT THE ANSWER PROBLEM 2: Computational Multiple-Choice Questions: 1-6. (2 points each)You must show your work next to your answer on the answer sheet to get any credit.USE THE FOLLOWING INFORMATION TO ANSWER QUESTIONS 1, 2, AND 3.Abba Medical Supply’s inventory records for industrial switches indicate the following at October 31:10/1Beginning inventory7 units at \$160 per unit10/8Purchase4 units at \$160 per unit10/15Purchase11 units at \$170 per unit10/26Purchase5 units at \$176 per unit10/31Ending inventory8 units1.The cost of ending inventory using the periodic FIFO costing method is:a.\$1,390b.\$1,280c.\$1,336d.\$1,330Answer:(5 units x \$ 176) + (3 units x \$170) = \$ 13902.The cost ofgoods sold using the periodic LIFO costing method is:a.\$3,180b.\$3,174c.\$3,120d.\$3,230Answer:(7 units x \$ 160) + (1 units x \$ 160) Closing Inventory = \$ 1280Cost of Goods sold:Opening + Purchase – Closing 1120 + 3390 – 1280 = \$ 3230Page 1 of 9
3.The cost of ending inventory using the periodic weighted-average method is (rounded to the nearest dollar):a.\$1,390b.\$1,280c.\$1,336 d.\$1,322Answer:[ (7 x 160) + (4 x 160) + (11 x 170) + (5 x 176) ] / 27= Average Rate \$ 167.04Closing Inventory 8 units x 167.04 = \$ 1336.304.A company purchased factory equipment on April 1, 2014, for \$48,000. It is estimatedthat the equipment will have a \$3,000 salvage value at the end of its 10-year useful life.Using the straight-line method of depreciation, the amount to be recorded as depreciationexpense at December 31, 2014, is:a.\$4,500b.\$4,800c.\$3,375d.\$3,750Answer (48000 – 3000) / 10 = 45005.A company purchased factory equipment for \$100,000 on January 1, 2014. It is estimatedthat the equipment will have a \$10,000 salvage value at the end of its estimated 4-yearuseful life. If the company uses the double-declining-balance method of depreciation, theamount of annual depreciation recorded for the second year after purchase would be:a.\$50,000.b.\$25,000.c.\$45,000.d.\$22,500.Acquisition Cost as on 1-1-2014100000Salvage Value 10000Life of asset in years 4Depreciation % 25%Double Depreciation50%Depreciation for 1st year 50000WDV after 1st year end 50000Depreciation for 2nd year 25000Page 2 of 9
6.A machine with a cost of \$80,000 has an estimated salvage value of \$5,000 and anestimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second fullyear, during which the machine was used 5,000 hours?a. \$25,000b. \$15,000c. \$21,667d. \$26,667Acquisition Cost as on 1-1-201480000Salvage Value 5000Life of asset in hours15000hours Hours used by end of 2nd year 5000hoursBalance on which asset to be depreciated 75000Depreciation after 2nd year end 25000Page 3 of 9

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