1. The following information was available from the inventory records of Crane C
ID: 2510167 • Letter: 1
Question
1. The following information was available from the inventory records of Crane Company for January:
Units
Unit Cost
Total Cost
Balance at January 1
5000
$9.10
$45,500
Purchases:
January 6
5000
10.37
51,850
January 26
5000
10.74
53,700
Sales
January 7
(2000
)
January 31
(9000
)
Balance at January 31
4000
Assuming that Crane uses the periodic inventory system, what should be the cost of goods sold at January 31, using the weighted-average inventory method, rounded to the nearest dollar?
A. $108,372
B. $102,298
C. $110,770
D. $40,486
2. On December 30, 2017, Sheffield Corp.. purchased a machine from Pharoah Company in exchange for a zero-interest-bearing note requiring eight payments of $218,000. The first payment was made on December 30, 2017, and the others are due annually on December 30. At date of issuance, the prevailing rate of interest for this type of note was 10%.
On Sheffield's December 31, 2017 balance sheet, the net note payable to Pharoah is
A. $1,279,315
B. $1,288,137
C. $1,070,368
D. $1,163,014
3. On July 1, 2017, Ed Wynne signed an agreement to operate as a franchisee of Bramble Corp., for a franchise fee. Of this amount, $324,000 was paid when the agreement was signed and the balance is payable in four equal annual payments of $162,000 beginning July 1, 2018. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. Wynne's credit rating indicates that he can borrow money at 13% for a loan of this type.
Wynne should record the acquisition cost of the franchise on July 1, 2017 at
A. $1,056,240
B. $972,000
C. $667,440
D. $805,864
Units
Unit Cost
Total Cost
Balance at January 1
5000
$9.10
$45,500
Purchases:
January 6
5000
10.37
51,850
January 26
5000
10.74
53,700
Sales
January 7
(2000
)
January 31
(9000
)
Balance at January 31
4000
Explanation / Answer
Dear student, only one question is allowed at a time. I am answering the first question
Weighted average rate
= Total value of opening Inventory and purchases / Total quantity of opening Inventory and purchases
= ($45,500 + $ 51,850 + $ 53,700) / (5,000 + 5,000 + 5,000)
= $ 151,050 / 15,000
= $ 10.07 per unit
Number of units sold as on January 31
= 2,000 + 9,000
= 11,000
So, Cost of goods sold
= Number of units sold x Weighted average rate
= 11,000 x $10.07
= $ 110,770
So, as per above calculations, option C is the correct option
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