- Iowa Steakhouse opened a new restaurant on the site of an existing building. It paid the owner $520,000 for the land and building, of which it attributes $104,000 to the land and $416,000 to the building. Iowa incurred legal costs of $25,200 to conduct a title search and prepare the necessary legal documents for the purchase. It then paid $71,800 to renovate the building to make it suitable for Iowa’s use. Property and liability insurance on the land and building for the first year was $24,000, of which $8,000 applied to the period during renovation and $16,000 applied to the period after opening. Property taxes on the land and building for the first year totaled $30,000, of which $10,000 applied to the period during renovation and $20,000 applied to the period after opening. Calculate the amounts that Iowa Steakhouse should include in the Land account and in the Building account. (10 points)
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- For the following six items, assume that Talbot Company, a growing profitable company, has large and growing inventories. Assume that Talbot Company has been using a FIFO cost flow assumption and plans to switch to LIFO for both financial reporting and tax reporting. Assume that Talbot pays all income taxes currently, as accrued, in cash.
Required:
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Deferred tax balance on the balance sheet will be __________.
6.
Inventory turnover will be __________.
- Inventory flows for Toy Elmo Company for the month of January are as follows:
# of units Unit cost Beginning inventory* 250 $1.00 Purchases: January 3 100 1.10 January 15 150 1.15 January 17 300 1.05 Sales: January 5 200 January 18 100 January 24 150 *Assume the same for FIFO, LIFO, and weighted average cost flow assumptions.
Required:
Compute the cost of goods sold and ending inventory for the Toy Elmo Company using cost flow assumption and the following assumptions: (18 points)
a. FIFO under a periodic inventory system b. LIFO under a periodic inventory system c. Weighted average under a periodic inventory system d. FIFO under a perpetual inventory system e. LIFO under a perpetual inventory system f. Weighted average under a perpetual inventory system
- For the following six items, assume that Talbot Company, a growing profitable company, has large and growing inventories. Assume that Talbot Company has been using a FIFO cost flow assumption and plans to switch to LIFO for both financial reporting and tax reporting. Assume that Talbot pays all income taxes currently, as accrued, in cash.
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