Question

Sally Smith owns a furniture store. One of her most popularitems is a leather recliner.

1) Following is the reclinerinventory activity for August. The recliners on hand at August 1had a unit cost of $300.

Required:

A)   If the furniture storeuses the first-in, first-out (FIFO) inventory method and periodicapproach, what values would be assigned to ending inventory, costof goods sold and gross profit?

B)If the furniture store uses thelast-in, first-out (LIFO) inventory method and periodic approach,what values would be assigned to ending inventory, cost of goodssold and gross profit?

C)If the furniture store uses theweighted-average inventory method and periodic approach, whatvalues would be assigned to ending inventory, cost of goods soldand gross profit?

NOTE: Be sure to show all your calculations. This hasthe possibility of partial credit. Incorrect answers withoutcalculations will automatically result in zero points.

2) Sunshine Company purchased equipment for$100,000 in 2012. The machinery originally had an estimated life of8 years and a salvage value of $10,000. Sunshine used thestraight-line depreciation method. In 2016, the estimated life waschanged to 11 years.

Required: What is the annual depreciationexpense for 2016?

NOTE: Be sure to show all your calculations. This hasthe possibility of partial credit. Incorrect answers withoutcalculations will automatically result in zero points.