Question

1) Sullivan Produce Co. switched from FIFO to LIFO on January 1, 2015, for external reporting...

1)

Sullivan Produce Co. switched from FIFO to LIFO on January 1, 2015, for external reporting and income tax purposes, while retaining FIFO for internal reports. On that date, the FIFO inventory equaled $360,000. The ensuing three-year period resulted in the following:

Inventory Cost
Date Year-End Costs Index
December 31, 2015 $438,000 1.05
December 31, 2016 460,000 1.15
December 31, 2017 520,000 1.25


Refer to Exhibit 7-5. The ending inventory at December 31, 2016, at base-year price is:

$402,000

$400,000

$424,000

$406,000

2)

A derivative may be classified as:

a shareholders' equity account only.

either an asset or a liability account.

an asset account only.

a liability account only.

3)

In 2014, Xenex Market Services began development of a customer management software package for their own internal use and incurred $40,000 costs related to conceptual formulation of design alternatives. In 2015, management agreed to fully fund development of the software and spent $120,000 in development costs. In 2016, development was completed after incurring an additional $160,000 in development costs plus another $ 60,000 was spent on training costs for using the software. In 2017, the company started using the software and began amortizing related costs over a 10-year expected useful life. What is the amount of amortization expense for 2017 for this internally-developed software?

$32,000

$34,000

$38,000

$28,000

Homework Answers

Answer #1

1.B.$400,000.

inventory of december 31 2016 at base year price = year end cost / cost index

=>$460,000 /1.15

=>$400,000.

2.B. either an asset or a liability account.

A derivative may either be considered as either an asset or a liability in the balance sheet at fairvalue.

3.A.$32,000.

Design alternative cost $40,000
2015 development cost $120,000
2016 development cost $160,000
Total cost $320,000

annual amortization = cost of software / life in years

=>$320,000 / 10

=>$32,000.

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