16. A company purchased land for $84,000 cash. Real estate brokers\' commission

Question

16. A company purchased land for $84,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1,200. Under the historical cost principle, the cost of land would be recorded at

            a.         $94,800.

            b.         $84,000.

            c.         $89,800.

            d.         $96,000

17. Which of the following is a true statement about inventory systems?

a.   Periodic inventory systems require more detailed inventory records.

b.   Perpetual inventory systems require more detailed inventory records.

c.   A periodic system requires cost of goods sold be determined after each sale.

d.   A perpetual system determines cost of goods sold only at the end of the accounting period.

18. At December 31, 2012 Mohling Company’s inventory records indicated a balance of $652,000. Upon further investigation it was determined that this amount included the following:

$112,000 in inventory purchases made by Mohling shipped from the seller 12/27/12 terms FOB destination, but not due to be received until January 2nd

$74,000 in goods sold by Mohling with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th.

$6,000 of goods received on consignment from Dollywood Company

What is Mohling’s correct ending inventory balance at December 31, 2012?

a.   $540,000

b.   $646,000

c.   $460,000

d.   $534,000

19. Financial information is presented below:

Operating expenses                           $ 35,000

Sales returns and allowances               12,000

Sales discounts                                       3,000

Sales revenue                                     140,000

Cost of goods sold                               85,000

The profit margin would be

a.   .32.

b.   .16.

c.   .03.

d.   .04.

Explanation / Answer

Option b. Perpetual inventory systems require more detailed inventory records is correct.

Note: Please post remaining questions seperately.

16) Purchased cost of land $              84,000 Add: Real estate brokers commission $                5,000 Add: Amount spent for demolishing an old building on the land before construction of a new building could start $                7,000 Less: Proceeds from salvage of the demolished building $              -1,200 Cost of land $              94,800 Therefore, option a. $94,800 is correct. 17)

Option b. Perpetual inventory systems require more detailed inventory records is correct.

Note: Please post remaining questions seperately.

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