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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

LOWER-OF-COST-OR-MARKET Bouie Company’s beginning inventory and purchases during the fiscal year ended December 31, 20--, were as follows:

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There are 20 units of inventory on hand on December 31.

  1. 1. Calculate the total amount to be assigned to the ending inventory under each of the following periodic inventory methods:
    1. (a) FIFO
    2. (b) Weighted-average (round calculations to two decimal places)
  2. 2. Assume that the market price per unit (cost to replace) of Bouie’s inventory on December 31, 20--, was $39. Calculate the total amount to be assigned to the ending inventory on December 31 under each of the following methods:
    1. (a) FIFO lower-of-cost-or-market
    2. (b) Weighted-average lower-of-cost-or-market
  3. 3. What journal entry would be made under lower-of-cost-or-market for parts 2(a) and (b) above?

1.

(a)

To determine

Calculate the cost of ending inventory under FIFO method (Periodic inventory system).

Explanation

Periodic Inventory System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period.

First-in-First-Out (FIFO): In First-in-First-Out method, the first purchased items are sold first. The value of the ending inventory consists of the recently purchased items...

1.

(b)

To determine

Calculate the cost of ending inventory under weighted average cost method (Periodic inventory system).

2.

(a)

To determine

Calculate the cost of ending inventory under FIFO method (Lower of cost or market).

2.

(b)

To determine

Calculate the cost of ending inventory under weighted average cost method (Lower of cost or market).

3.

(a)

To determine

Show the journal entry would be made under lower-of-cost-or-market.

3.

(b)

To determine

Show the journal entry would be made under lower-of-cost-or-market.

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