Financial Accounting (5th Edition) (What's New in Accounting)
5th Edition
ISBN: 9780134727790
Author: Robert Kemp, Jeffrey Waybright
Publisher: PEARSON
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Chapter 5, Problem 2SE
1.
To determine
Describe which inventory method would meet C Company’s goal.
2.
To determine
Describe which inventory method would best meet the need of Company C.
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Click to watch the Tell Me More Learning Objective 7 video and then answer the questions below.
1. The total units to be produced in a period is calculated as
a. estimated units sold plus desired ending inventory less estimated beginning inventory
b. estimated units sold less desired ending inventory add estimated beginning inventory
c. estimated units sold plus desired ending inventory plus estimated beginning inventory
d. estimated units sold less desired ending inventory less estimated beginning inventory
b
2. Cost of goods sold is calculated as
a. beginning finished goods inventory plus cost of goods manufactured less beginning finished goods inventory
b. beginning finished goods inventory plus cost of goods manufactured plus beginning finished goods inventory
c. beginning finished goods inventory less cost of goods manufactured less beginning finished goods inventory
d. beginning finished goods inventory less cost of goods manufactured plus beginning finished goods inventory
d…
Ward Hardware does not expect costs to change dramatically and wants to use an inventory costing method that averages cost changes.
Requirements
1.
Which inventory costing method would best meet Ward's goal?
2.
Assume Ward wanted to expense out the newer purchases of goods instead. Which inventory costing method would best meet that need?
Requirement 1. The inventory costing method that averages cost changes is the:
O A. Last-in, first-out (LIFO) cost method
O B. Weighted-average method
OC. First-in, first-out (FIFO) cost method
O D. Specific identification method
Requirement 2. The inventory costing method that expenses out the newer purchases of goods is the:
O A. Last-in, first-out (LIFO) cost method
B. Weighted-average method
Oc. Specific identification method
O D. First-in, first-out (FIFO) cost method
2. Shepherd Cycles does not expect prices to change dramatically and wants
to use a method that averages price changes.
B. Which inventory method would best meet Shepherd's goal?
Enter answer here.
C. What if Shepherd wanted to expense out the newer purchases of goods
instead? Which inventory would best meet that need?
Enter answer here.
Chapter 5 Solutions
Financial Accounting (5th Edition) (What's New in Accounting)
Ch. 5 - Prob. 1DQCh. 5 - How are the financial statements of a manufacturer...Ch. 5 - What is a cost-flow assumption? Why is a cost-flow...Ch. 5 - If a company had two units that cost 1 each in its...Ch. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - Prob. 10DQ
Ch. 5 - During April, Bargain Hardware made sales of...Ch. 5 - Prob. 2SCCh. 5 - Prob. 3SCCh. 5 - Prob. 4SCCh. 5 - Prob. 5SCCh. 5 - Prob. 6SCCh. 5 - Prob. 7SCCh. 5 - Prob. 8SCCh. 5 - Prob. 9SCCh. 5 - Prob. 10SCCh. 5 - Prob. 11SCCh. 5 - Prob. 12SCCh. 5 - Prob. 1SECh. 5 - Prob. 2SECh. 5 - Prob. 3SECh. 5 - Prob. 4SECh. 5 - Prob. 5SECh. 5 - Prob. 6SECh. 5 - Prob. 7SECh. 5 - Prob. 8SECh. 5 - Lower-of-cost-or-market rule (Learning Objective...Ch. 5 - Prob. 10SECh. 5 - Inventory principles and terminology (Learning...Ch. 5 - Prob. 12SECh. 5 - Prob. 13SECh. 5 - Prob. 14SECh. 5 - Prob. 15SECh. 5 - Prob. 16AECh. 5 - Prob. 17AECh. 5 - Prob. 18AECh. 5 - Prob. 19AECh. 5 - Prob. 20AECh. 5 - Prob. 21AECh. 5 - Prob. 22AECh. 5 - Prob. 23AECh. 5 - Prob. 24AECh. 5 - Prob. 25AECh. 5 - Prob. 26AECh. 5 - Prob. 27AECh. 5 - FIFO (Learning Objective 2) 10-15 min. Tee Time,...Ch. 5 - LIFO (Learning Objective 2) 10-15 min. Refer to...Ch. 5 - Prob. 30BECh. 5 - Prob. 31BECh. 5 - Prob. 32BECh. 5 - Prob. 33BECh. 5 - Prob. 34BECh. 5 - Prob. 35BECh. 5 - Prob. 36BECh. 5 - Prob. 37BECh. 5 - Prob. 38BECh. 5 - Prob. 39BECh. 5 - Computing LIFO and journalizing inventory...Ch. 5 - Prob. 41APCh. 5 - FIFO, LIFO, and average cost (Learning Objectives...Ch. 5 - Prob. 43APCh. 5 - Prob. 44APCh. 5 - Prob. 45APCh. 5 - Estimating ending inventory (Learning Objective 7)...Ch. 5 - Prob. 47APCh. 5 - Prob. 48BPCh. 5 - Prob. 49BPCh. 5 - FIFO, LIFO, and average cost (Learning Objectives...Ch. 5 - Prob. 51BPCh. 5 - Prob. 52BPCh. 5 - Prob. 53BPCh. 5 - Prob. 54BPCh. 5 - Prob. 55BPCh. 5 - Continuing Exercise This exercise continues the...Ch. 5 - Prob. 1CPCh. 5 - Prob. 1CFSAPCh. 5 - Prob. 1EIACh. 5 - Prob. 2EIACh. 5 - Prob. 1FACh. 5 - Prob. 1IACh. 5 - Prob. 1SBACh. 5 - Prob. 1WCCh. 5 - Comprehensive Problem The Accounting Cycle for a...
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- 3. If a retailer bought n numbers of goods at P price each, he sold each good at a rater marked up on the selling price. Describe how to find the selling price and the gross margin for each good. How is the gross margin used in sales? 1S 4. After learning the concept of mark up, how would you assess your market value in terms of abilities? What can you do to increase your market value?arrow_forwardMatch the inventory method with its related characteristic. Assume a period of rising prices in all cases. 1. LIFO 2. FIFO 3. Weighted Average 4. Specific Identification Will result in reporting the highest net [Choose ] income Will result in showing the highest [Choose] reported inventory Tends to smooth out the effects of [Choose] inflation Will result in reporting the highest Cost of Goods Sold [Choose] Used where it is practical to physically separate the different purchases made [Choose] 6. Will result in matching current costs [Choose]arrow_forwardThis exercise tests your understanding of the four inventory methods. List the name of the inventory method that best fits the description. Assume that the cost of inventory is rising. 1. Results in a cost of ending inventory that is close to the current cost of replacing the inventory 2. Used to account for automobiles, jewelry, and art objects 3. Generally associated with saving income taxes 4. Provides a middle-ground measure of ending inventory and cost of goods sold 5. Maximizes reported income 6. Enables a company to keep reported income from dropping lower by liquidating older layers of inventory (assume rising prices) 7. Writes inventory down when its net realizable value drops below its historical cost 8. Results in an old measure of the cost of ending inventory 9. Matches the most current cost of goods sold against sales revenue 10. Enables a company to buy high-cost inventory at year-end and thereby decrease reported income and income taxarrow_forward
- 1.At a time of declining prices, which cost flow assumption will result in the highest ending inventory? A. FIFO B. LIFO C. Weighted average D. Either A or C 2. When the cost of inventory is rising, which inventory cost flow method will produce the lowest amount of cost of goods sold? A. FIFO B. Weighted Average. C. All methods will produce the same amount of cost of goods sold. D. LIFO 200 The inventory records for Raymond Co. reflected the following Beginning Inventory @ May 1 200 units @ $1.00 First Purchase @ May 7 Second Purchase @ May 17 Third Purchase @ May 23 Sales @ May 31 B. $1.15 C. $1.14 D. $1.31 B. $130 C. $324 D. $340 300 units @ $1.10 = 400 units @ $1.20 100 units @ $1.30 = 120 900 units @ $1.50 1350 30 go 3. Determine the weighted average cost per unit for May. A. $1.22 .4.Determine the amount of cost of goods sold assuming the LIFO cost flow method. A. $1,140 B. $1,040 C. $1,000 D. $940 5. Determine the amount of gross margin assuming the FIFO cost flow method. A. $114arrow_forwardLearning Objective 2: Compare ending inventory and cost of goods sold—FIFOvs. LIFO) Paulson’s specializes in sound equipment. Company records indicate the followingdata for a line of speakers:Unit Cost$4964JunDate12713ItemBalance...................Purchase.................Sale ........................Sale ........................Quantity18376Sale Price$115103Requirements1. Determine the amounts that Paulson’s should report for cost of goods sold and endinginventory two ways:a. FIFOb. LIFO2. Paulson’s uses the FIFO method. Prepare the company’s income statement for the monthended June 30, 2018, reporting gross profit. Operating expenses totaled $340, and theincome tax rate was 35%.arrow_forwardYou have been hired by Johnson and Johnson Corp. this year. Your supervisor approaches you and need you recommendation on the inventory valuation assumption you will recommend for the company to use instead to using Specific Identification method. Instruction: Identify each of the cost flow assumptions that company can use. Explain the advantages and disadvantages of using each of them. Each one will you recommend and Why? What are the characteristics of a Just-in-time inventory system? Explain some advantages and risks of Just-in-time inventory system.arrow_forward
- What is the cost of goods sold using fifo periodic? What is ending inventory using fifo periodic What is cost of goods sold using lifo periodic What is ending inventory using lifo periodic What is cost of goods sold using weighted average periodic What is ending inventory using weighted average periodic What is sales using fifo periodic What is sales using life periodic What is gross margin using fifo periodic What method would result in lower taxesarrow_forwardEvery day, businesses have to make decisions that affect their bottom line. One such decision pertains to valuing inventory. Imagine that you have decided to open a new electronics store. As one of your first tasks, your accountant has asked you to adopt an inventory cost assumption for inventory valuation. Explain which method you would adopt and why.arrow_forwardInventory management is an important aspect of retail strat- egy. For example, it is important to know when it is time to reorder and how much to order at a time, a metric called re- order point. As consumers buy a product day after day, the inven- tory level declines. The question for retailers is how low they should allow the inventory level to dedine before they place an order; that is, when is the optimal time to reorder? If you order too late, you take a chance of losing sales because you are out of stock. If you order too soon, consumer tastes may change, and you will be stuck with excess and unsellable mer- chandise. And generally, retailers do not want more inventory on hand than is necessary to avoid stock-outs because inven- tory ties up cash. Hence, the decision of when to order and how much to order is critical to a retailer's bottom line. The simplest formula to determine the reorder point is the following: Reorder point x Usage rate + Lead time Usage rate is basically how…arrow_forward
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INVENTORY & COST OF GOODS SOLD; Author: Accounting Stuff;https://www.youtube.com/watch?v=OB6RDzqvNbk;License: Standard Youtube License