LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been used for both tax and financial statement reporting since the 1930s. The higher cost of goods sold under LIFO in these circumstances results in lower reported profit than under FIFO. In the 2012 budget, President Obama has threatened to repeal LIFO. If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 100 barrels of crude oil: Beginning inventory and purchasesBarrelsBarrel costTotal costJanuary 1120$ 94$ 11,280March 1451034,635June 160975,820September 170926,440December 1451024,590 340 $ 32,765. What is the cost of ending inventory: ? What is the cost of goods sold: ?

LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been used for both tax and financial statement reporting since the 1930s. The higher cost of goods sold under LIFO in these circumstances results in lower reported profit than under FIFO. In the 2012 budget, President Obama has threatened to repeal LIFO. If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 100 barrels of crude oil: Beginning inventory and purchasesBarrelsBarrel costTotal costJanuary 1120$ 94$ 11,280March 1451034,635June 160975,820September 170926,440December 1451024,590 340 $ 32,765. What is the cost of ending inventory: ? What is the cost of goods sold: ?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter11: Depreciation, Depletion, Impairment, And Disposal

Section: Chapter Questions

Problem 5C: The following two statements concern depreciation: 1. Because our plant was shut down for part of...

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The following two statements concern depreciation: 1. Because our plant was shut down for part of the year, we will not depreciate it. Depreciating it for the full year would increase our costs and overstate the inventory. 2. I think we should have increasing depreciation expense each period because it will increase the funds recovered near the end of the assets life when maintenance costs are high and we will need to replace the asset. Also, I think tax rates will be higher toward the end of the assets life, so we will be better off to have a larger amount of depreciation expense then. Required: Prepare a short report that evaluates each of the following statements separately.
II. Jerry Prior, Beeler Corporation’s controller, is concerned that net income may be lower this year. He is afraid upper-level management might recommend cost reductions by laying off accounting staff including him. Prior knows that depreciation is a major expense for Beeler. The company currently uses the double-declining-balance method for both financial reporting and tax purposes, and he’s thinking of selling equipment that, given its age, is primarily used when there are periodic spikes in demand. The equipment has a carrying value of $2,000,000 and a fair value of $2,180,000. The gain on the sale would be reported in the income statement. He doesn’t want to highlight this method of increasing income. He thinks, “Why don’t I increase the estimated useful lives and the salvage values? That will decrease depreciation expense and require less extensive disclosure, since the changes are accounted for prospectively. I may be able to save my job and those of my staff.” Instructions…
A large corporate farming operation is holding an inventory of corn and wheat and is concerned that excess harvests this season will lower the value of the commodities. In order to hedge against adverse market changes, the corporation acquired the following contracts on June 1:^ 30 contracts to sell 5,000 bushels of corn in December at a future price of $3.56 per bushel.^ 30 contracts to sell 5,000 bushels of wheat in December at a future price of $6.35 per bushel.Spot and future prices are as follows: Corn—Dollars per Bushel Wheat—Dollars per Bushel Spot Price Future Price Spot Price Future Price June 1 June 30 July 31 $3.42 3.41 3.43 $3.56 3.53 3.54 $6.20 6.19 6.175 $6.35 6.33 6.32 For each of the fair value hedges, determine, by month, the change in the value of the respective inventories and the gain or loss on the futures contracts.
As the world reports on inflation, companies are taking steps to adjust their prices and manage their resources. Citizens are worried that prices will increase to a level that is difficult. Atten’tive Corporation is a private corporation formed since 2000 for the purpose of selling products to local and regional economies. The government has consulted with Atten’tive for assistance with providing cheaper product options. As at January 2005, they switched to Activity Based Costing System and has been using it ever since. Due to the switch in costing methods, Atten’tive Company used multiple cost drivers, which has a direct cause/effect relationship in its applied overhead costs. This method allows for a better accounting of costs, which may invariably have transferred out and therefore reduce some manufacturing costs. The Chief Operating Officer held a meeting with all Department Heads on their operational budgets and to present a cash flow position of the company among other schedules.…
A corporation has an excess input VAT due to its excessive local purchases of goods and services. This excess input VAT is accumulating every month and reached a significant value. The management is considering to deal with the excess input VAT. a. Determine the best option for the corporation in treating its excess input VAT to gain maximum tax benefit. Justify your answer. b. Assume that the excess input VAT is directly attributable to its Zero-rated VAT Sales, explain the options that could possibly be considered by the management.
The current equilibrium price and quantity in the chewing gum market are $3 and 156,000 units, respectively. The government introduces a tax of $0.75 per unit which leads to the price that buyers pay to increase to $3.25 and the price that sellers receive to fall to $2.50, while the quantity traded drops to 150,000. 1) Calculate the tax incidence on buyers and sellers. Who bears the largest burden of the tax? 2 ) What is the revenue that the government collects from the tax? Show all your calculations either in the answer box below or on the file you will upload. If your calculations are on the uploaded file, your final answer should still be in the answer box below. Round your results to two decimal places if needed.
Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020’s income statement reported a loss of $20 million. Just before the end of the 2021 fiscal year, a memo from the company’s chief financial officer (CFO) to Jim Fielding, the company controller, included the following comments:If we don’t do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write-down. The resulting loss for 2021 will cause a violation of our debt covenants and force the company into bankruptcy. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. I know the company’s president, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2021 which will boost our loss to a profit. Then J.B. Sales will simply…
Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…
Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…
Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…
Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…
The senior VP in charge has asked that you make a recommendation for the purchase of new equipment.Ideally, the company wants to limit its capital investment to $500,000. However, if an asset meritsspending more, an investment exceeding this limit may be considered. You assemble a team to helpyou. Your goal is to determine which option will result in the best investment for the company. Toencourage capital investments, the government has exempted taxes on profits from new investments.This legislation is to be in effect for the foreseeable future.The average reported operating income for the company is $1,430,500.The company uses an 11% discount rate in evaluating capital investments.The team is considering the following optionsOption 1:The asset cost is $300,000.The asset is expected to have an 8-year useful life with no salvage value.Straight-line depreciation is used.The net cash inflow is expected to be $62,000 each year for 8 years.A significant portion of this asset is made from…