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1. Presented below is a list of items which may or may not be reported as inventory in a company's

December 31 balance sheet.

a) Materials on hand not yet placed into production by a manufacturing firm.

b) Goods purchased f.o.b. shipping point that are in transit at December 31.

c) Raw materials on which a manufacturing firm has started production , but which are not completely processed.

d) Costs identified with units completed by a manufacturing firm, but not yet sold.

e) Costs incurred to advertise goods held for resale.


Indicate which of these items would typically be reported as inventory in the financial statements. If an item should not be reported as inventory , indicate how it should be reported in the financial statements.

2.The following information about a company for the year 2014 has been availed to you.

January 1 Purchase of a lawn mower and accessories                 sh. 240,000

Useful life                                                    5 years

Salvage value                                                sh. 40,000

Estimated annual fuel cost                                      sh. 10,000

Monthly salary of operator                                        sh. 8,000


Compute the depreciation charge for 2014,. Use the straight line method.

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