Reference no: EM131596840

Intermediate Accounting Assignment - Notes Receivable, Inventories, PPE

Problem 1 - You are a manufacturer of turbines and are a publicly accountable entity. On December 31, 20x0, you made a sale of a turbine to a customer. You estimate that your customer's incremental borrowing rate is 6%. Your incremental borrowing rate is 5%.

Required -

For each of the following terms of payment, prepare the journal entries for this transaction for the years ended December 31, 20x0, 20x1 and 20x2.

a) The customer will pay $500,000 on December 31, 20x2 and will pay interest of 6% on the $500,000 on December 31, 20x1 and 20x2.

b) The customer will pay $500,000 on December 31, 20x2 and pay no interest in the interim.

c) The customer will pay $500,000 on December 31, 20x2 and will pay interest of 2% on the $500,000 on December 31, 20x1 and 20x2.

d) The customer will pay equal payments of principal and interest over 5 years with the first payment made on December 31, 20x1. The nominal value of the principal at December 31, 20x0 is $500,000. The interest charged is 3%.

e) The customer will pay $500,000 on December 31, 20x2 and pay no interest in the interim. The cash sales price of the turbine would be $450,000.

f) Repeat part (d) on the assumption that you are a private enterprise subject to ASPE and you wish to use the straight-line method.

Problem 2 -

Data on the one of the items of inventory of Tracce Corporation for the month of November is as follows:

Required -                                                                                         

Calculate the value of the ending inventory, cost of goods sold and gross margin under each of the following assumptions:

a) FIFO - Periodic

b) Weighted Average - Periodic

c) Moving Weighted Average - Perpetual (use 4 decimals in the calculation of unit costs).