4) Grant Company\'s accounting records indicated the following information: Inve

Question

4) Grant Company's accounting records indicated the following information: Inventory, 1/1/x1 600,000 3,000,000 4,000,000 Purchases during 20x1 Sales during 20x1 A physical inventory taken on December 31, 20x1, resulted in an ending inventory of $700,000. Grant's 30% in recent years. new employee. At December 31, 20x1, what is the estimated cost of missing gross profit on sales has remained constant at Grant suspects some inventory may have been taken by a nventory? A) $100,000 B) $150,000 C) $200,000 D) $300,000 5) Cotton Hotel Corporation recently purchased Holiday Hotel and the land on which it is located with the plan to tear down the Holiday Hotel and build a new luxury hotel on the site. The cost of the Holiday Hotel should be A) depreciated over the period from acquisition to the date the hotel is B) C) D) scheduled to be torn down. written off as an extraordinary loss in the year the hotel is torn down. capitalized as part of the cost of the land. capitalized as part of the cost of the new hotel. 6) Fisher Company exchanged which Fisher was holdin The Dolan Company common stock, which had been purchased by Fisher for $50 per share, had a quoted market value of $58 per share at the date of exchange. The equipment had a recorded amount on West's books of $26,500. What journal entry should Fisher make to record this exchange? A) Equipment g as an investment, for equipment from West Company 25,000 Investment in Dolan Co. Common Stock 25,000 B) Equipment 26,500 Investment in Dolan Co. Common Stock . 25,000 Gain on Disposal of Investment. 1,500 26,500 2,500 Loss on Disposal of Investment. Investment in Dolan Co. Common Stock 29,000 D) Equipment. 29,000 25,000 4,000 Investment in Dolan Co. Common Stock Gain on Disposal of Investment

Explanation / Answer

4) Answer : A) $100000

Explanation : Missing inventory = (total inventory available during year - Sales net of gross profit) - Inventory as on Dec 31, 01 = ( $3600000 - $4000000 * 0.70) - $700000 = $3600000 - $2800000 - $700000 = $100000

5) Answer : C) capitalized as part of the cost of the land.

This is because it is compulsory to purchase Holiday hotel to purchase the land. The building the new hotel is totally seperate transaction.

6) Answer : B) Equipment - Dr $26500 , Investment in dolan co. Common Stock - Cr. $25000 , Gain on disposal of investment - Cr. $1500

Explanation : This is because the market value of the investment don't affect the transaction as the main purpose is to exchange the equipment and not to sell the investment.

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