Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 10, Problem 2SSC
To determine
To prepare: The memo to explain the
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b. Prepare the December 31 year-end journal entry for Year 5 Year 6, and Year 7, to convert inventory from FIFO to LIFO.
Ohio Inc. maintains its internal inventory records on a FIFO basis. On January 1 of Year 5, Ohio changed to dollar-value LIFO for external reporting and income tax purposes. The following data are available for Ohio Inc.'s inventory. Its base inventory is $200,000.
Ending inventory at current-year cost... LIFO price index..
Year 5
$280,000 1.20
Year 6
$320,000 1.30
Year 7
$350,000
1.45
Required
a. Compute its ending inventory on a dollar-value LIFO basis for Year 5 Year 6, and Year 7.
b. Assume that its Year 8 ending inventory on a dollar-value LIFO basis is $288,390 and its Year 8 LIFO price index is 1.50. What is its Year 8 ending inventory on a current cost basis?
Use the information provided in the exhibits to calculate the inventory amounts as they should be reported in the financial statements prepared under U.S. GAAP and IFRS. Enter the appropriate amounts in the associated cells. Enter all amounts as positive values. Round all amounts to the nearest whole number.
The following data pertain to Company A’s inventory that was purchased on January 5, Year 1, for $40,000:
March 31, Year 1
June 30, Year 1
December 31, Year 1
Estimated selling price
$42,000
$44,000
$41,000
Cost of disposal
2,000
2,000
2,500
Normal profit margin
1,200
1,400
1,100
Cost of completion
1,000
1,000
1,000
Current replacement cost
38,000
42,000
36,000
Note: Entire inventory was sold on May 1, Year 2.
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Company A is a publicly traded company that reports interim financial statements on a quarterly basis. Until recently, that is all that Company A has…
need solution for the problem p-22-3 from the book INTERMEDIATE ACCOUNTING AND REPORTING BY JAMES WAHLEN (3RD edition)
Koopman company began operations on january 1 2018,and uses FIFO inventory method....
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Required:
Prepare the 2020 Financial Statements
Chapter 10 Solutions
Intermediate Accounting (2nd Edition)
Ch. 10 - How is inventory tracked under a perpetual...Ch. 10 - Barbara Wight is Chief Financial Officer at Taylor...Ch. 10 - What costs should be included in the unit cost of...Ch. 10 - When does the inventory allocation problem arise?Ch. 10 - Explain the difference between the FIFO method of...Ch. 10 - Which method of inventory results in an inventory...Ch. 10 - If unit costs are rising and inventory levels are...Ch. 10 - How can financial statements be converted from the...Ch. 10 - Explain the unit of measure under the dollar-value...Ch. 10 - What do firms use as the market value when...
Ch. 10 - Do U.S. GAAP and IFRS treat inventory write-downs...Ch. 10 - Under IFRS, how do firms determine...Ch. 10 - How does the conventional retail method...Ch. 10 - Why would a company use the gross profit method to...Ch. 10 - How are required LIFO disclosures used to compute...Ch. 10 - How does a company build LIFO layers under the...Ch. 10 - Giddens Company adopted the dollar-value UFO...Ch. 10 - The Loyd Company lad 150 units of product Omega on...Ch. 10 - Simmons, Inc. uses the lower-of-cost-or-market...Ch. 10 - Simmons, Inc. uses the lower-of-cost-or-market...Ch. 10 - The Loyd Company had 150 units of product Omega on...Ch. 10 - The Loyd Company had 150 units of product Omega on...Ch. 10 - On March 1, Year 1, LuxWear me had beginning...Ch. 10 - Types of Manufacturing Inventory. Complete the...Ch. 10 - Periodic Inventory System. Emmy Company uses a...Ch. 10 - Prob. 10.3BECh. 10 - Prob. 10.4BECh. 10 - FIFO, Perpetual Basis. Spider incorporated...Ch. 10 - LIFO, Perpetual Basis. Using the information...Ch. 10 - Prob. 10.7BECh. 10 - LIFO Reserve. Best Stores is considering a change...Ch. 10 - LIFO. Perpetual Basis. Source Enterprises reports...Ch. 10 - LIFO Liquidation. Using the information provided...Ch. 10 - Prob. 10.11BECh. 10 - Dollar-Value LIFO, Conversion to FIFO. Using the...Ch. 10 - Lower of Cost or Market. Count Clothing Company...Ch. 10 - Lower of Cost or Market. Using the information in...Ch. 10 - Lower of Cost or Market, IFRS. Using the...Ch. 10 - Prob. 10.16BECh. 10 - Prob. 10.17BECh. 10 - Lower of Cost or Market. Sarat Boot Company...Ch. 10 - Prob. 10.19BECh. 10 - Prob. 10.20BECh. 10 - Prob. 10.21BECh. 10 - Gross Profit Method. Sammi Company needs to...Ch. 10 - Prob. 10.23BECh. 10 - LIFO Retail Inventory Method. Complete the...Ch. 10 - LIFO Retail Inventory Method. Complete the...Ch. 10 - Moving Average, FIFO, LIFO. Arthur Lloyd...Ch. 10 - Moving Average, FIFO, LIFO, Presentation, and...Ch. 10 - Moving Average, FIFO, LIFO. Zoola, Inc. provided...Ch. 10 - Prob. 10.4ECh. 10 - LIFO, Conversion to FIFO. Inventory transactions...Ch. 10 - LIFO. Burke Company uses the LIFO perpetual method...Ch. 10 - Prob. 10.7ECh. 10 - Dollar-Value LIFO, LIFO Reserve. CWB Teleconcepts,...Ch. 10 - Dollar-Value LIFO, No Liquidation. Joe the Grocer...Ch. 10 - Prob. 10.10ECh. 10 - Lower of Cost or Market. All-Kinds-of-Cases...Ch. 10 - Prob. 10.12ECh. 10 - Lower of Cost or Market. Printmaster Distributors...Ch. 10 - Prob. 10.14ECh. 10 - Prob. 10.15ECh. 10 - Conventional Retail Inventory Method. Melvin...Ch. 10 - Gross Profit Method. A tsunami destroyed Kyoto...Ch. 10 - Prob. 10.18ECh. 10 - Prob. 10.19ECh. 10 - Prob. 10.20ECh. 10 - Dollar-Value LIFO Retail Inventory Method....Ch. 10 - Moving Average, FIFO, LIFO. Morocco Imports...Ch. 10 - Prob. 10.2PCh. 10 - LIFO, Conversion to FIFO. The Outsider Company,...Ch. 10 - Dollar-Value LIFO. The Happenings Company adopted...Ch. 10 - Dollar-Value LIFO. No Liquidation. Nat's Toy...Ch. 10 - Dollar-Value LIFO, LIFO Liquidation. The following...Ch. 10 - Dollar-Value LIFO. LIFO Liquidation. Silvio's...Ch. 10 - Lower of Cost or Market. Framingdale Factories....Ch. 10 - Lower of Cost or Market. O'Sullivan Corporation...Ch. 10 - Conventional Retail Inventory Method. John Stevens...Ch. 10 - Prob. 10.11PCh. 10 - Prob. 10.12PCh. 10 - Basic Retail Inventory Method and Conventional...Ch. 10 - Basic Retail Inventory Method and Conventional...Ch. 10 - Prob. 10.15PCh. 10 - Conventional Retail Inventory Method, Lower of...Ch. 10 - Prob. 1JCCh. 10 - Judgment Case 2: Inventory Costing BBS is a...Ch. 10 - Judgment Case 3: Lower of Cost or Market KR...Ch. 10 - Prob. 1FSCCh. 10 - Prob. 2FSCCh. 10 - Prob. 1SSCCh. 10 - Prob. 2SSCCh. 10 - Surfing the Standards Case 3: Time Shares Treasure...Ch. 10 - Surfing the Standards Case 4: Lower of Cost or...Ch. 10 - Prob. 1BCCCh. 10 - Basis for Conclusions Case 2: The Lower of Cost or...
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- Effects of FIFO and LIFO Sheepskin Company sells to colleges and universities a special paper that is used for diplomas. Sheepskin typically makes one purchase of the special paper each year on January 1. Assume that Sheepskin uses a perpetual inventory system. You have the following data for the 3 years ending in 2019: Required: 1. What would the ending inventory and cost of goods sold be for each year if FIFO is used? 2. What would the ending inventory and cost of goods sold be for each year if LIFO is used? 3. CONCEPTUAL CONNECTION For each year, explain the cause of the differences in cost of goods sold under FIFO and LIFO.arrow_forward(Appendix 8.1) Inventory Write-Down The inventories of Berry Company for the years 2019 and 2020 are as follows: Berry uses the periodic inventory method and the FIFO inventory cost flow assumption. Required: 1. Assume the inventory that existed at the end of 2019 was sold in 2020. Prepare the necessary journal entries at the end of each year to record the correct inventory valuation if Berry uses the: a. direct method b. allowance method 2. Next Level Refer to your answer for E8-6. How does the use of a periodic or perpetual inventory system affect the valuation of inventory?arrow_forward( Appendices 6A and 6B) Inventory Costing Methods Edwards Company began operations in February 2019. Edwards accounting records provide the following data for the remainder of 2019 for one of the items the company sells: Â Edwards uses a periodic inventory system. All purchases and sales were for cash. Required: 1. Compute cost of goods sold and the cost of ending inventory using FIFO. 2. Compute cost of goods sold and the cost of ending inventory using LIFO. 3. Compute cost of goods sold and the cost of ending inventory using the average cost method. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.) 4. Prepare the journal entries to record these transactions assuming Edwards chooses to use the FIFO method. 5. CONCEPTUAL CONNECTION Which method would result in the lowest amount paid for taxes? 6. CONCEPTUAL CONNECTION Refer to Problem 6-67B and compare your results. What are the differences? Be sure to explain why the differences occurred.arrow_forward
- (Appendix 8.1) Inventory Write-Down The following are the inventories for the years 2019, 2020, and 2021 for Parry Company: Required: 1. Assume the inventory that existed at the end of each year was sold in the subsequent year. Prepare journal entries to record the lower of cost or net realizable value for each of the following alternatives: a. allowance method, periodic inventory system b. direct method, periodic inventory system 2. Next Level Refer to your answer for P8-2. How does the use of the periodic inventory system affect the write-down of inventory to the lower of cost or net realizable value?arrow_forwardBusiness with gross receipts of $25 million or less may treat inventory as nonincidental materials and supplies. Find Regulation Section 1.162-3 and read paragraphs (a)(1) and (a)(2) to help answer the following: Frank owns an auto repair shop that serves a particular model of auto and so he tends to purchase parts in bulk. Frank is eligible to treat inventory as non-incidental materials and elects to do so. In December of 2019 he purchases 24 oil filters. He uses one to repair an auto in January 2020, and then about 2 per month and ends 2020 with 14 filters. Explain how Frank will treat his oil filter inventory.arrow_forwardLower of Cost or Market Garcia Company uses FIFO, and its inventory at the end of the year was recorded in the accounting records at $17,800. Due to technological changes in the market, Garcia would be able to replace its inventory for $16,500. Required: 1. Using the lower of cost or market method, what amount should Garcia report for inventory on its balance sheet at the end of the year? 2. Prepare the journal entry required to value the inventory at the lower of cost or market.arrow_forward
- LIFO and Inventory Pools On January 1, 2016, Grover Company changed its inventory cost flow method to the LIFO cost method from the FIFO cost method for its raw materials inventory. It made the change for both financial statement and income tax reporting purposes. Grover uses the multiple-pools approach under which it groups substantially identical raw materials into LIFO inventory pools. It uses weighted average costs in valuing annual incremental layers. The composition of the December 31, 2018, inventory for the Class F inventory pool is as follows: Inventory transactions for the Class F inventory pool during 2019 were as follows: On March 2, 2019, 4,800 units were purchased at a unit cost of 13.50 for 64,800. On September 1, 2019, 7,200 units were purchased at a unit cost of 14.00 for 100,800. A total of 15,000 units were used for production during 2019. The following transactions for the Class F inventory pool took place during 2020: On January 11, 2020, 7,500 units were purchased at a unit cost of 14.50 for 108,750. On May 14, 2020, 5,500 units were purchased at a unit cost of 15.50 for 85,250. On December 29, 2020, 7,000 units were purchased at a unit cost of 16.00 for 112,000. A total of 16,000 units were used for production during 2020. Required: 1. Prepare a schedule to compute the inventory (units and dollar amounts) of the Class F inventory pool at December 31, 2019. Show supporting computations in good form. 2. Prepare a schedule to compute the cost of Class F raw materials used in production for the year ended December 31, 2019. 3. Prepare a schedule to compute the inventory (units and dollar amounts) of the Class F inventory pool at December 31, 2020. Show supporting computations in good form.arrow_forwardUnder U.S. GAAP, LIFO is an acceptable inventory method. Financial statement information for three companies that use LIFO follows. All table numbers are in millions of dollars. Assume these companies adopted IFRS, and thus were required to use FIFO, rather than LIFO. a. Prepare a table with the following columns: (1) Difference between FIFO and LIFO inventory valuation. (2) Revised IFRS net income using FIFO. (3) Difference between FIFO and LIFO inventory valuation as a percent of total current assets. (4) Revised IFRS net income as a percent of the reported net income. b. Complete the table for the three companies. c. For which company would a change to IFRS for inventory valuation have the largest percentage impact on total current assets (Col. 3)? d. For which company would a change to IFRS for inventory valuation have the largest percentage impact on net income (Col. 4)? e. Why might Kroger have a negative impact on net income from using LIFO, while the other two companies have a positive impact on net income from using LIFO?arrow_forwardRequired information [The following information applies to the questions displayed below.] Pam’s Creations had the following sales and purchase transactions during Year 2. Beginning inventory consisted of 60 items at $350 each. The company uses the FIFO cost flow assumption and keeps perpetual inventory records. Date Transaction Description March 5 Purchased 50 items @ $370 April 10 Sold 30 items @ $450 June 19 Sold 60 items @ $450 September 16 Purchased 70 items @ $390 November 28 Sold 45 items @ $480 Requireda. Record the inventory transactions in general journal format. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) b. Calculate the gross margin Pam’s Creations would report on the Year 2 income statement. c. Determine the ending inventory balance Pam’s Creations would report on the December 31, Year 2, balance sheet.arrow_forward
- a. Differentiate between periodic inventory system and perpetual inventory system from an accounting point of view.b. Amanda Wholesale Company purchases merchandise from a variety of manufactures andsells the merchandise to a variety of retailers. The following transactions occurred duringFebruary 2020:Feb. 2. Purchased $7,600 of merchandise from Zenith manufacturing; terms are1/10, n/30.5. Paid $270 freight on February 2 purchase.11. Paid Zenith for the February 2 purchase.13. Purchased $5,000 of merchandise of Forbes Manufacturing; terms are 2/10, n/4.16. Received a $300 allowance (purchases return) for returned items on the February 13 purchase since some of the merchandise was the wrong size.17. Purchased $4,200 of merchandise from Toddler industries; terms are 2/10, n/3020. Sold merchandise with a list price of $4,000 ($2,200 cost) to valley mart.22. Valley mart returned 20% of the merchandise from the February 20 sales.23. Paid Forbes manufacturing for the February 13…arrow_forwardRequired information Skip to question [The following information applies to the questions displayed below.]Smith-Kline Company maintains inventory records at selling prices as well as at cost. For 2021, the records indicate the following data: ($ in 000s) Cost Retail Beginning inventory $ 78 $ 123 Purchases 669 1,004 Freight-in on purchases 28 Purchase returns 1 2 Net markups 4 Net markdowns 8 Net sales 914 Required:1. Use the retail method to approximate cost of ending inventory valued under Average cost method. (Enter your answer in thousands including 2 decimal places, i.e. 12,550 would be 12.55.) 2. Use the retail method to approximate cost of ending inventory valued under Conventional method. (Enter your answer in thousands including 2 decimal places, i.e. 12,550 would be 12.55)arrow_forwardRequired information [The following information applies to the questions displayed below.] Altira Corporation provides the following information related to its merchandise inventory during the month of August 2021: Aug.1 Inventory on hand—3,700 units; cost $7.80 each. 8 Purchased 18,500 units for $7.20 each. 14 Sold 14,800 units for $13.70 each. 18 Purchased 11,100 units for $6.40 each. 25 Sold 13,800 units for $12.70 each. 28 Purchased 5,700 units for $5.80 each. 31 Inventory on hand—10,400 units. Required:1. Using calculations based on a perpetual inventory system, determine the inventory balance Altira would report in its August 31, 2021, balance sheet and the cost of goods sold it would report in its August 2021 income statement using the FIFO method.arrow_forward
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