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CHAPTER 4: MEASUREMENT METHOD
MULTIPLE CHOICES QUESTIONS
Question 4.1: Inventories valuation requires the determination of all of the following, except: a. the direct costs to be included in inventory. b. the value of physical goods to be included in inventory. c. the cost of goods held on consignment from other companies. d. the cost flow assumption to be adopted. Question 4.2: The accountant for the ABC Company is preparing the income statement for 202x and the balance sheet at December 31, 202x. ABC uses the periodic inventory system. The January 1, 202x merchandise inventory balance will appear a. only as an asset on the balance sheet. b. only in the cost of goods sold section of the income statement. c. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet. d. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet. Question 4.3: The following information is available for DH Company for 202x : VND Freight-in 30,000, Purchase returns 75,000, Selling expenses 150,000, Ending inventory 260,000, The cost of goods sold is equal to 400% of selling expenses. What is the cost of goods available for sale? a. $600,000, b. $890,000, c. $815,000, d. $860,000,
Question 4.4: The following information was available from the inventory records of DTN Company for February: Units Unit Cost (VND) Total Cost (VND) Balance at February 1 3,000 244,250 732,750 , Purchases: February 6 2,000 257,500 515,000, February 26 2,700 267,750 722,925, Sales: February 7 (2,500) February 28 (4,000) Balance at February 28 1, Assuming that DTN uses perpetual inventory system, what should be the value of inventory at February 28, using the moving-average inventory method, rounded to the nearest dollar? a. 315.150.000 VND b. 307,100,000 VND c. 307,800,000 VND d. 310,800,000 VND Question 4.5: NAT Co. has the following data related to inventory: Inventory, March 1 100 units @ 105,000 VND Purchase, March 7 350 units @ 110,000 VND Purchase, March 16 70 units @ 112.500 VND Inventory, March 31 130 units The company uses FIFO method. The cost of goods sold is a. 14,475,000 VND. b. 13,800,000 VND. c. 43,300,000 VND. d. 42,400,000 VND. Question 4.6: Costs of inventory received includes all of the following, except: a. costs that are directly related with the purchasing of inventories.
Sales 2-Jun 600 @ 137,500 VND 6-Jun 1,600 @ 137,500 VND 9-Jun 1,000 @ 137,500 VND 10-Jun 400 @ 150,000 VND 18-Jun 1,400 @ 150,000 VND 25-Jun 200 @ 150,000 VND Assuming that perpetual inventory records are kept in units only, the ending inventory on an average-cost basis, rounded to the nearest dollar, is a. 102,400,000 VND. b. 105,950,000 VND. c. 107,250,000 VND. d. 108,050,000 VND.
ESSAY QUESTIONS
Problem 1: DTN Co., Ltd. applies VAT using the deduction method and has data on purchased equipment used for the production department as follows:
- On March 20, 2023, the company purchased equipment, the total amount payable on the seller's invoice including 10% VAT is 396,000,000 VND. The delivery invoice was 2,750, VND (including 10% VAT) paid in cash.
- April 11, 2023 paid 8,000,000 VND for equipment testing expenses.
- On April 15, 2023, the testing procedure was completed, the company paid 12,000,000VND for employees participating in equipment installation.
- On May 1, 2023, the production equipment was handed over and put into use for the plant number 01. The company determined that the expected useful life of the equipment is 10 years, applying straight-line method for depreciation.
- On April 19, 2023, paid to the seller through the bank. Requirement:
- Determine the acquisition cost of the equipment.
- Record the journal entries.
- Calculate the annual depreciation expenses and monthly depreciation expenses of the equipment.
- Calculate the depreciation of equipment in 2023. Prepare the journal entries. Problem 2: At DTN Company, accounting policy apply for VAT using the deduction method and perpetual system for inventory. Data in October is as follows: (unit: 1,000 VND) Raw materials inventory at the beginning of October: 1,200 kg, unit price 14/kg Transactions occurred in October were:
- Purchased 1,000 kg raw materials, paid via bank transfer, price in invoice excluded 10% VAT is 14.2/kg.
- Issued 800 kg raw materials for production.
- Purchased 2,000 kg raw materials, with the price of 14.3/kg.
- Issued 3,000 kg raw materials to sell to customer B who paid via bank transfer with the invoice price including 10% VAT of 19.8/kg. Requirement:
- Calculate the price of issued raw materials at the end of October according to the following methods:
- First in - first out method;
- Periodic average cost method.
- Record the entries of transactions above, knowing that the Company uses the first-in - first-out method to calculate raw material cost. Problem 3: Zimmer Company uses the perpetual inventory system and the FIFO method. The following information is available for the month of May: (‘000VND) May 1 Beginning inventory 20 units @ 5. 10 Purchase 20 units @ 8. 15 Sales 15 units 18 Purchase 10 units @ 9. 21 Sales 25 units 30 Purchase 10 units @ 10.
Instructions Compute annual depreciation for the first and second years using the straight-line method. Record the journal entries. Problem 7: (‘000VND) Guardado Company purchased a new machine for 400.000. It is estimated that the machine will have a 5-year useful service life. The straight-line method of depreciation will be used. Instructions Prepare a depreciation schedule which shows the annual depreciation expense on the machine for its 5-year life. Problem 8: (‘000VND) Northeast Airlines purchased an aircraft on January 1, 2015, at a cost of $40.000.000. The estimated useful life of the aircraft is 20 years. On January 1, 2018 the airline revises the total estimated useful life to 13 years. Instructions (a) Compute the depreciation and book value at December 31, 2017 using the straight-line method. (b) Assuming the straight-line method is used, compute the depreciation expense for the year ended December 31, 2018.
