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1) French Hens Manufacturing Co. purchased a ten-ton draw press at a cost of $180,000 with terms of 5/15, n/45. Payment was made within the discount...

1) French Hens Manufacturing Co. purchased a ten-ton draw press at a cost of $180,000

with terms of 5/15, n/45. Payment was made within the discount period. Shipping costs

were $4,600, which included $200 for insurance in transit. Installation costs totaled

$12,000, which included $4,000 for taking out a section of a wall and rebuilding it

because the press was too large for the doorway. The capitalized cost of the ten-ton draw

press is:

A) $171,000

B) $187,400

C) $187,600

D) $185,760



Use the following to answer questions 2 through 5

On January 1, 2014, Grinch Inc. began construction of an automated cattle feeder system. The system was

finished and ready for use on September 30, 2015. Expenditures on the project were as follows:

January 1, 2014 $200,000

September 1, 2014 $300,000

December 31, 2014 $300,000

March 31, 2015 $300,000

September 30, 2015 $200,000

Grinch borrowed $750,000 at 12% interest on January 1, 2014 to be used specifically for the construction

of the asset. This loan was outstanding throughout the construction period. The company also had

$4,500,000 in 9% bonds outstanding in 2014 and 2015. The company uses the specific interest method to

capitalize interest, and their year ends on December 31st.

2. Interest capitalized by Grinch Inc. for 2014 was:

A) $48,000

B) $42,000

C) $60,000

D) $36,000

3. Interest capitalized by Grinch Inc. for 2015 was:

A) $115,740

B) $86,805

C) $97,875

D) $67,500

4. Interest expense reported by Grinch Inc. on its 2014 income statement was:

A) $495,000

B) $459,000

C) $405,000

D) $ 90,000

5. The total cost of the cattle feeder system is:

A) $1,300,000

B) $1,386,805

C) $1,451,740

D) $1,422,805


The Rudolph Corporation's inventory on December 31, 2014, was $325,000

based on a physical count before considering the following transactions:

▪ Merchandise costing $30,000, shipped f.o.b. shipping point from a supplier on

December 30, 2014, was received by Rudolph on January 5, 2015.

▪ Merchandise costing $22,000, shipped f.o.b. destination from a supplier on

December 28, 2014, was received by Rudolph on January 3, 2015.

▪ Merchandise costing $38,000 was shipped f.o.b. destination by Rudolph to a

customer on December 28, 2014. The goods arrived at the customer's location

on January 6, 2015.

▪ Merchandise costing $12,000 was being held on consignment by Prancer

Company. This merchandise was not included in the physical count on

December 31, 2014.


6)What amount should Rudolph Corporation report as inventory in its December

31, 2014, balance sheet?

A) $367,000

B) $427,000

C) $405,000

D) $325,000


Use the following to answer questions 7 and 8:

On January 1, 2014, King Company adopted the dollar-value LIFO method for its

inventory. The inventory value on this date was $590 million. The December 31, 2014 and 2015

ending inventory valued at year-end costs were $702 million and $810 million, respectively. The

appropriate cost indexes are 1.08 for 12/31/2014 and 1.20 for 12/31/2015.


7)Using the dollar-value LIFO method, ending inventory on Kings's

balance sheet at December 31, 2014 is:

A) $637.2 million

B) $702.0 million

C) $650.0 million

D) $654.8 million

8) Using the dollar-value LIFO method, ending inventory on Kings's balance

sheet at December 31, 2015 is:

A) $692.0 million

B) $810.0 million

C) $675.0 million

D) $684.8 million

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