SOLVED

13) Albacore Sailboats manufactures small sailing dingies. In 2019, the company’s accountant recorded the following costs into the inventory account: Variable costs (raw materials, labour, variable overhead) 11,098,000 Fixed manufacturing overhead 3,000,000 Salary of factory manager 100,000 Shipping to customer 350,000 Commission on sales 550,000 Total 15,098,000 The company had no work in process at the end of both 2018 and 2019. Finished goods at the end of 2018 amounted to 6,000 sailboats at $300/boat. Production was 50,000 sailboats and 4,000 boats remained in inventory at December 31, 2019. The company uses a periodic inventory system and the FIFO cost flow assumption. Required: a.Of the $15,098,000, how much should have been capitalized into inventories? b.Compute the ending value of inventory and the cost of goods sold for 2019. c.If the error in inventory costing had not been corrected as per part (a),by how much would inventory be overstated at the end of 2019? d.Record the journal entry to correct the error in inventory costing. 14) Wasson Company purchased land and a building in 2016 at a cost of $6,000,000. The land was valued at $1,000,000. At the time of purchase, the estimated useful life of the building was 25 years. The company depreciates the building on a straight-line basis and has chosen to record a full year of depreciation in the year of acquisition, and none in the year of disposal. It is now 2026 and Wasson has found it necessary to replace all of the windows in this building at a cost of $1,000,000. Upon further review, management concluded that the windows should have been recorded as a separate component because, as of 2016, their useful lives did not extend for 25 years–the manufacturer’s specifications indicate that the windows would be expected to remain in functioning condition until 2026. The estimated value of the windows when the building was purchased was $800,000. Required: a.Record the journal entry to record the replacement of the windows assuming that the windows were recorded as a separate component. b.Assume that LaSalle committed an error in not componentizing the windows separately from the building. Record the adjusting journal entry or entries required to correct this error. c.Record the journal entry to record the replacement of the windows after having properly recorded the windows as a separate component in part (b).