Question: Comfort Solutions sells a wide range of mattresses to consumers. For the most recent year, Comfort Solutions provided the following data: Beginning inventory $2,450,000 Purchases $23,125,000 Ending inventory Transportation in $2,225,000 $511,500 Comfort Solutions informs you that it has traditionally treated transportation in as a period expense. However, the firm has a new auditor this year. The auditor believes that the cost of transportation in should be treated as a product cost and, as such, should flow through the firm's inventory account. Required: a. What is Comfort's cost of goods sold under its current (traditional) system? b. Assume the auditor asks Comfort to allocate the cost of transportation in between cost of goods sold (as computed in part (a)) and ending inventory. Using this approach, what is Comfort's cost of goods sold? c. Which approach, (a) or (b), do you believe is most appropriate for Comfort Solutions?

Question: Comfort Solutions sells a wide range of mattresses to consumers. For the most recent year, Comfort Solutions provided the following data: Beginning inventory $2,450,000 Purchases $23,125,000 Ending inventory Transportation in $2,225,000 $511,500 Comfort Solutions informs you that it has traditionally treated transportation in as a period expense. However, the firm has a new auditor this year. The auditor believes that the cost of transportation in should be treated as a product cost and, as such, should flow through the firm's inventory account. Required: a. What is Comfort's cost of goods sold under its current (traditional) system? b. Assume the auditor asks Comfort to allocate the cost of transportation in between cost of goods sold (as computed in part (a)) and ending inventory. Using this approach, what is Comfort's cost of goods sold? c. Which approach, (a) or (b), do you believe is most appropriate for Comfort Solutions?

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 8P: Comprehensive The following information for 2019 is available for Marino Company: 1. The beginning...

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Golden Eagle Company began operations on April 1 by selling a single product. Data on purchases and sales for the year are as follows: Purchases: Sales: The president of the company, Connie Kilmer, has asked for your advice on which inventory cost flow method should be used for the 32,000-unit physical inventory that was taken on December 31. The company plans to expand its product line in the future and uses the periodic inventory system. Write a brief memo to Ms. Kilmer comparing and contrasting the LIFO and FIFO inventory cost flow methods and their potential impacts on the companys financial statements.
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