On October 1, 2021, Tyeso Company entered in a noncancellable purchase commitment to purchase inventory at P3,000 per unit. The 2,500 units of inventory will be delivered on February 28, 2022. On December 31, 2021, the fair value of each inventory is at P2,850. On date of delivery, each unit of inventory is selling at P2,910. A. How much is the amount of liability on purchase commitment as of December 31, 2021? B. How much is the amount of inventory recorded on February 28, 2022? C. How much is the amount of gain or loss recognized on February 28, 2022?

On October 1, 2021, Tyeso Company entered in a noncancellable purchase commitment to purchase inventory at P3,000 per unit. The 2,500 units of inventory will be delivered on February 28, 2022. On December 31, 2021, the fair value of each inventory is at P2,850. On date of delivery, each unit of inventory is selling at P2,910. A. How much is the amount of liability on purchase commitment as of December 31, 2021? B. How much is the amount of inventory recorded on February 28, 2022? C. How much is the amount of gain or loss recognized on February 28, 2022?

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

Chapter7: Inventories: Cost Measurement And Flow Assumptions

Section: Chapter Questions

Problem 5RE: Dani Corporation signed a binding commitment on December 2 to purchase inventory for 300,000 cash on...

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Dani Corporation signed a binding commitment on December 2 to purchase inventory for 300,000 cash on January 2. By December 31, the market price (replacement cost) of the inventory had declined to 280,000. Prepare Danis journal entries at year-end and at the date of purchase.
Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been 250,000 in 2019. For 2020, Hellers cost of goods sold under FIFO was 360,000, while it would have been 410,000 under LIFO. Heller is subject to a 21% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior years income (net of taxes) that Heller would report on its retained earnings statement for 2020.
Spath Company borrows 75,000 by issuing a 4-year, noninterest-bearing note to a customer on January 1, 2019. In addition, Spath agrees to sell inventory to the customer at reduced prices over a 5-year period. Spaths incremental borrowing rate is 12%. The customer agrees to purchase an equal amount of inventory each year over the 5-year period so that a straight-line method of revenue recognition is appropriate. Required: Prepare the journal entries on Spaths books for 2019 and 2020. (Round answers to 2 decimal places.)
The following items were included in Venicio Corporations inventory account on December 31, 2019: What amount should Venicio report as inventory at December 31, 2019? a. 21,000 b. 20,400 c. 26,000 d. 35,000
On July 1, 2019, Aldrich Company purchased as an available-for-sale security 200,000 face value, 9% U.S. Treasury notes for 194,000. The notes mature July 1, 2020, and pay interest semiannually on January 1 and July 1. The notes were sold on December 1, 2019, for 199,000. Aldrich normally uses straight-line amortization on all of its notes. In its income statement for the year ended December 31, 2019, what amount should Aldrich report as a gain on the sale of the available-for-sale security? a. 2,500 b. 3,500 c. 5,000 d. 6,000
The cost of the inventory on January 31, 2019, under the FIFO method is: a. 400 b. 2,700 c. 3,100 d. 3,200
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the allowance method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
On January 1, 2019, Piper Company entered into an agreement with Save-Mart to sell its most popular product, the gadget. The contract stipulates that the price per unit will decrease as Save-Mart purchases higher volumes of the gadget, as follows: The contract states that Save-Mart pays Piper the unit price based on the current sales volume. Once a volume threshold is reached, the price is retroactively reduced to the applicable price per unit. Based on its past experience with similar contracts, Piper believes that the total sales volume for the year will be 1,800 units and uses the most likely amount approach to estimate variable consideration. In addition, Piper concludes it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty surrounding the variable consideration is resolved. Required: 1. Determine the transaction price per unit that Piper should use to record revenue. 2. Assume that Save-Mart purchases 800 units in the first quarter of 2019 and 900 units in the second quarter of 2019. Prepare Pipers journal entries to record the sales in the first and second quarters. 3. Given the higher than expected sales volume in the first half of the year, Piper increases its estimate of the sales volume to 2,800 units. Prepare the journal entry to record this change in estimate.
Kraft Manufacturing Company manufactures two products: Mult and Tran. At December 31, 2019, Kraft used the FIFO inventory method. Effective January 1, 2020, Kraft changed to the LIFO inventory method. The cumulative effect of this change is not determinable, and, as a result, the ending inventory of 2019, for which the FIFO method was used, is also the beginning inventory for 2020 for the LIFO method. Any layers added during 2020 should be costed by reference to the first acquisitions of 2020, and any layers liquidated during 2020 should be considered a permanent liquidation. The following information was available from Krafts inventory records for the two most recent years: Required: Compute the effect on income before income taxes for the year ended December 31, 2020, resulting from the change from the FIFO to the LIFO inventory method.
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the direct method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
At the end of 2019, Manny Company recorded its ending inventory at 350,000 based on a physical count. During 2020, the company discovered that the correct inventory value at the end of 2019 should have been 400,000 because it made a counting error. Upon discovery of this error in 2020, what correcting journal entry will Manny make? Ignore income taxes.
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.