Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
error_outline
This textbook solution is under construction.
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Ethics and Inventory An electronics store has a large number of computers that use outdated technology in its inventory. These computers are reported at their cost. Shortly after the December 31 year end, the store manager insists that the computers can be sold for well over their cost. But the stores accountant has been told by the sales staff that it will be difficult to sell these computers for more than half of their inventory cost. Required: What are the consequences for the accountant of participating in a misrepresentation of the inventorys value?arrow_forwardEthics and Inventory An electronics store has a large number of computers that use outdated technology in its inventory. These computers are reported at their cost. Shortly after the December 31 year end, the store manager insists that the computers can be sold for well over their cost. But the stores accountant has been told by the sales staff that it will be difficult to sell these computers for more than half of their inventory cost. Required: What are the consequences for the business of failing to recognize the decline in value?arrow_forwardENDING INVENTORY COSTS Danny Steele owns a small specialty store, named Steeles Storeroom, whose year-end is June 30. Determine the total amount that should be included in Steeles Storerooms year-end inventory. A physical inventory taken on June 30 reveals the following: Cost of merchandise on the showroom floor and in the warehouse 42,600 Goods held on consignment (consignor is Quality Manufacturer) 7,600 Goods that Steeles Storeroom, as the consignor, has for sale at the location of Midtown Galleria 8,300 Sales invoices indicate that merchandise was shipped on June 28, terms FOB shipping point, delivered at buyers receiving dock on July 6 4,350 Sales invoices indicate that merchandise was shipped on June 26, terms FOB destination, delivered at buyers receiving dock on July 1 2,800arrow_forward
- Inventory Valuation You are engaged in an audit of Roche Mfg. Company for the year ended December 31, 2019. To reduce the workload at year-end, Roche took its annual physical inventory under your observation on November 30, 2019. Roches inventory account, which includes raw materials and work in process, is on a perpetual basis, and it uses the first-in, first-out method of pricing. It has no finished goods inventory. The companys physical inventory revealed that the book inventory of 60,570 was understated by 3,000. To avoid distorting the interim financial statements, Roche decided not to adjust the book inventory until year-end except for obsolete inventory items. Your audit revealed this information about the November 30 inventory: Pricing tests showed that the physical inventory was overpriced by 2,200. Footing and extension errors resulted in a 150 understatement of the physical inventory. Direct labor included in the physical inventory amounted to 10,000. Overhead was included at the rate of 200% of direct labor. You determined that the amount of direct labor was correct and the overhead rate was proper. The physical inventory included obsolete materials recorded at 250. During December, these materials were removed from the inventory account by a charge to cost of sales. Your audit also disclosed the following information about the December 31, 2019, inventory. Total debits to certain accounts during December are: The cost of sales of 68,600 included direct labor of 13,800. Normal scrap loss on established product lines is negligible. However, a special order started and completed during December had excessive scrap loss of 800 which was charged to Manufacturing Overhead Expense. Required: 1. Compute the correct amount of the physical inventory at November 30, 2019. 2. Without prejudice to your solution to Requirement 1, assume that the correct amount of the inventory at November 30, 2019, was 57,700. Compute the amount of the inventory at December 31,2019.arrow_forwardErrors As controller of Lerner Company, which uses a periodic inventory system, you discover the following errors in the current year: 1. Merchandise with a cost of 17,500 was properly included in the final inventory, but the purchase was not recorded until the following year. 2. Merchandise purchases are in transit under terms of FOB shipping point. They have been excluded from the inventory, but the purchase was recorded in the current year on the receipt of the invoice of 4,300. 3. Goods out on consignment have been excluded from inventory. 4. Merchandise purchases under terms FOB shipping point have been omitted from the purchases account and the ending inventory. The purchases were recorded in the following year. 5. Goods held on consignment from Talbert Supply Co. were included in the inventory. Required: For each error, indicate the effect on the ending inventory and the net income for the current year and on the net income for the following year.arrow_forwardRefer to the information in E22-13. Required: Prepare the correcting journal entries if the company discovers each error 2 years after it is made and it has closed the books for the second year. Ignore income taxes. E22-13: The following are independent errors made by a company that uses the periodic inventory system: a. Goods in transit, purchased on credit and shipped FOB destination, 10,000, were included in purchases but not in the physical count of ending inventory. b. Purchase of a machine for 2,000 was expensed. The machine has a 4-vear life, no residual value, and straight-line depreciation is used. c. Wages payable of 2,000 were not accrued. d. Payment of next years rent, 4,000, was recorded as rent expense. e. Allowance for doubtful accounts of 5,000 was not recorded. The company normally uses the aging method. f. Equipment with a book value of 70,000 and a fair value of 100,000 was sold at the beginning of the year. A 2-year, non-interest-bearing note for 129,960 was received and recorded at its face value, and a gain of 59,960 was recognized. No interest revenue was recorded and 14% is a fair rate of interest.arrow_forward
- Inventoriable Costs During the first month of operations, ABC Company incurred the following costs in ordering and receiving merchandise for resale. No inventory was sold. Required What amount do you recommend the company record as merchandise inventory on its balance sheet? Explain your answer. For any items not to be included in inventory, indicate their appropriate treatment in the financial statements.arrow_forwardItems Included in Inventory The following are several items that Golosow Companys controller has questioned regarding their inclusion in inventory: a. An invoice has been received for goods ordered. The goods were shipped FOB destination but have not been received. b. Purchases have been ordered and received (shipping terms were FOB destination), but no invoice has arrived. c. Product was shipped to a customer today, FOB destination, and the invoice mailed. d. Purchases are in the receiving department, but they are damaged and will be returned. e. Product is in the shipping department, and the invoice has not been mailed to the customer. Shipping terms are FOB shipping point. f. Golosow has inventory in its possession from Tate Company. The inventory is to be sold by Golosow under a consignment arrangement with Tate. Required: 1. For each of the preceding items, indicate whether Golosow should include them in inventory. Justify your answer. 2. Next Level Describe the basic criterion for including items in 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
- Perpetual and Periodic Inventory Systems Following is a partial list of account balances for two different merchandising companies. The amounts in the accounts represent the balances at the end of the year before any adjustments are made or the books are closed. Required Identify which inventory system, perpetual or periodic, each of the two companies uses. Explain how you know which systemeach company uses by looking at the types of accounts on its books. How much inventory should Company A have on hand at the end of the year? What is its cost of goods sold for the year? Explain why you cannot determine Company Bs cost of goods sold for the year from the information available.arrow_forwardClick the Chart sheet tab. On the screen is a column chart showing ending inventory costs. During a deflationary period, which bar (A, B, or C) represents FIFO costing, which represents LIFO costing, and which represents weighted average? Explain your reasoning. On January 4 following year-end, Rio Enterprises received a shipment of 60 units of product costing 580 each. These units had been ordered by Del in December and had been shipped to him on December 27. They were shipped FOB shipping point. Revise the FIFOLIFO3 worksheet to include this shipment. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as FIFOLIFOT. Using the FIFOLIFO3 file, prepare a 3-D bar (stacked) chart showing the cost of goods sold and ending inventory under each of the four inventory cost flow assumptions. No Chart Data Table is needed. Use the values in the Calculations Section of the worksheet for your chart. Enter your name somewhere on the chart. Save the file again as FIFOLIFO3. Print the chart.arrow_forwardLower of Cost or Market Shaw Systems sells a limited line of specially made products, using television advertising campaigns in large cities. At year end, Shaw has the following data for its inventory: Required: 1. Compute the carrying value of the ending inventory using the lower of cost or market rule applied on an item-by-item basis. 2. Prepare the journal entry required to value the inventory at lower of cost or market. 3. CONCEPTUAL CONNECTION What is the impact of applying the lower of cost or market rule on the financial statements of the current period? What is the impact on the financial statements of a subsequent period in which the inventory is sold?arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Chapter 6 Merchandise Inventory; Author: Vicki Stewart;https://www.youtube.com/watch?v=DnrcQLD2yKU;License: Standard YouTube License, CC-BY
Accounting for Merchandising Operations Recording Purchases of Merchandise; Author: Socrat Ghadban;https://www.youtube.com/watch?v=iQp5UoYpG20;License: Standard Youtube License