Michael Bolton Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis.

Exercise 9-3

Item No.	Quantity	Cost per Unit	Cost to Replace	Estimated Selling Price	Cost of Completion and Disposal	Normal Profit
1320	1,200	$3.20	$3.00	$4.50	$0.35	$1.25
1333	900	2.70	2.30	3.50	0.50	0.50
1426	800	4.50	3.70	5.00	0.40	1.00
1437	1,000	3.60	3.10	3.20	0.25	0.90
1510	700	2.25	2.00	3.25	0.80	0.60
1522	500	3.00	2.70	3.80	0.40	0.50
1573	3,000	1.80	1.60	2.50	0.75	0.50
1626	1,000	4.70	5.20	6.00	0.50	1.00

From the information above, determine the amount of Bolton Company inventory.

The amount of Bolton Company’s inventory

Exercise 9-12

Mark Price Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.

Inventory, May 1		$ 160,000
Purchases (gross)		640,000
Freight-in		30,000
Sales revenue		1,000,000
Sales returns		70,000
Purchase discounts		12,000

(a) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of sales.

The estimated inventory at May 31

(b) Compute the estimated inventory at May 31, assuming that the gross profit is 30% of cost. (Round percentage of sales to 2 decimal places, e.g. 78.74% and final answer to 0 decimal places, e.g. 6,225.)

The estimated inventory at May 31

rcise 9-19

Presented below is information related to Ricky Henderson Company.

	Cost	Retail
Beginning inventory	$ 200,000	$ 280,000
Purchases	1,375,000	2,140,000
Markups		95,000
Markup cancellations		15,000
Markdowns		35,000
Markdown cancellations		5,000
Sales revenue		2,200,000

Compute the inventory by the conventional retail inventory method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

Ending inventory using conventional retail inventory method

xercise 10-2

Martin Buber Co. purchased land as a factory site for $400,000. The process of tearing down two old buildings on the site and constructing the factory required 6 months.

The company paid $42,000 to raze the old buildings and sold salvaged lumber and brick for $6,300. Legal fees of $1,850 were paid for title investigation and drawing the purchase contract. Martin Buber paid $2,200 to an engineering firm for a land survey, and $68,000 for drawing the factory plans. The land survey had to be made before definitive plans could be drawn. Title insurance on the property cost $1,500, and a liability insurance premium paid during construction was $900. The contractor’s charge for construction was $2,740,000. The company paid the contractor in two installments: $1,200,000 at the end of 3 months and $1,540,000 upon completion. Interest costs of $170,000 were incurred to finance the construction.

Determine the cost of the land and the cost of the building as they should be recorded on the books of Martin Buberk Co. Assume that the land survey was for the building.

Cost of the Land		$
Cost of the Building		$

Exercise 10-23

Plant assets often require expenditures subsequent to acquisition. It is important that they be accounted for properly. Any errors will affect both the balance sheets and income statements for a number of years.

For each of the following items, indicate whether the expenditure should be capitalized or expensed in the period incurred.

		Items
(a)		Improvement.


(b)		Replacement of a minor broken part on a machine.

(c)		Expenditure that increases the useful life of an existing asset.

(d)		Expenditure that increases the efficiency and effectiveness of a productive asset but does not increase its salvage value.

(e)		Expenditure that increases the efficiency and effectiveness of a productive asset and increases the asset’s salvage value.

(f)		Expenditure that increases the quality of the output of the productive asset.

(g)		Improvement to a machine that increased its fair market value and its production capacity by 30% without extending the machine’s useful life.

(h)		Ordinary repairs.

Exercise 10-24

On December 31, 2014, Travis Tritt Inc. has a machine with a book value of $940,000. The original cost and related accumulated depreciation at this date are as follows.