17. For year two, ending inventory at retail (by count) totaled $310.
The ending price-level index for the year was 1.15. The cost-to-retail
ratio was .42. What is the ending inventory for financial reporting
purposes for this firm?
18. A firm began the construction of its new manufacturing facility in
January of 20x2. The following expenditures were made on
construction in that year:
19. Debt outstanding the entire year:
20. At the beginning of the year, Cann Co. started construction on a
new $2 million addition to its plant. Total construction expenditures
made during the year were $200,000 on January 2, $600,000 on May
1, and $300,000 on December 1. On January 2, the company
borrowed $500,000 for the construction at 12%. The only other
outstanding debt the company had was a 10% interest rate, long-term
mortgage of $800,000, which had been outstanding the entire year.
What amount of interest should Cann capitalize as part of the cost of
the plant addition?
21. A corporation enter ed into a purchase commitment to buy
inventory. At the end of the accounting period, the current market
value of the inventory was less than the fixed purchase price, by a
material amount. Which of the following accounting treatments is
most appropriate?
22. Merry Co. purchased a machine costing $125,000 for its
manufacturing operations and paid shipping costs of $20,000. Merry
spent an additional $10,000 testing and preparing the machine for use.
What amount should Merry record as the cost of the machine?
23. How does the retail inventory method establish the lower-of-costor-market valuation for ending inventory?
24. A firm uses the dollar value LIFO retail method and has $2,000 in
beginning inventory at retail at the beginning of the current year. The
base year equivalent of this amount is $1,600. The base year index is
1.00. The beginning inventory reported in the Balance Sheet is $800.
During the current year, the firm purchased $12,000 of inventory at