Question

1. Salmone Company reported the following purchases and sales for its only product. Salmone uses a perpetual inventory system. Determine the cost assigned to cost of goods sold using LIFO.

Date	Activities	Units Acquired at Cost	Units Sold at Retail
May 1	Beginning Inventory	230 units @ $18
5	Purchase	260 units @ $20
10	Sales		180 units @ $28
15	Purchase	140 units @ $21
24	Sales		130 units @ $29

Multiple Choice

• $6,460

• $5,740

• $5,950

• $6,330

• $6,540

2. A company issued 7%, 5-year bonds with a par value of $65,000. The market rate when the bonds were issued was 8%. The company received $62,366 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:

Multiple Choice

• $2,275.00.

• $2,600.00.

• $4,989.28.

• $4,550.00.

• $2,494.64.

3. A company issued 8.5%, 5-year bonds with a par value of $100,000. The market rate when the bonds were issued was 9.0%. The company received $98,021.82 cash for the bonds. Using the effective interest method, the amount of interest expense for the second semiannual interest period is:

Multiple Choice

• $4,250.00.

• $4,418.23.

• $4,410.98.

• $8,500.00.

• $8,829.21.

Answer 1

1)correct option is "D"

Under LIFO, units acquired last are sold first.

Sale of units will be as follows:

Sale of 180units
May5:	180*20=3600
Sale of 130 units
MAy 15	130*21=2730
Total cost of goods sold	6330

2)correct option is"E"-2494.64

Interest expense =carrying value of bond*market rate *n/12

=62366*.08*6/12

=2494.64

**there are 2semiannual period in a year comprising of 6month each

3)correct option is ""B"

Period	interest paid	intrrest expense	Discount amortized	carrying value of Bond
Issue date				98021.82
1	100000*.085*6/12=4250	98021.82*.09*6/12=4410.98	4410.98-4250=160.98	98021.82+160.98=98182.80
2	4250	98182.80*.09*6/12=4418.23	168.23	98182.8+168.23=98351.03