Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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Textbook Question
Chapter 5, Problem 5.22MCE
Cost of Goods Sold, FIFO, and LIFO
Kramer began operations early in 2016 and made the following purchases:
Kramer used the FIFO method to value its inventory and reported cost of goods sold expense for the year of $4,000.
Required
Determine the cost of goods sold expense assuming Kramer had used the LIFO method instead of the FIFO method.
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Dover Company began operations in 2015 and determined its ending inventory at cost and at a LCNRV at December 31, 2015, and December 31, 2016. This information is presented below.
Cost Net Realizable Value
12/31/15 £520,000 £485,000
12/31/16 615,000 585,000
Instructions
(c) Which of the two methods above provides the higher net income in each year?
(d) Explain the difference between the cost-of-goods-sold method and the loss method.
The December 31, 2016, inventory of Tog Company, based on a physical count, was determined to be $450,000. Included in that count was a shipment of goods received from a supplier at the end of the month that cost $50,000. The purchase was recorded and paid for in 2017. Another supplier shipment costing $20,000 was correctly recorded as a purchase in 2016. However, the merchandise, shipped FOB shipping point, was not received until 2017 and was incorrectly omitted from the physical count. A third purchase, shipped from a supplier FOB shipping point on December 28, 2016, did not arrive until January 3, 2017. The merchandise, which cost $80,000, was not included in the physical count and the purchase has not yet been recorded. The company uses a periodic inventory system. Required: 1. Determine the correct December 31, 2016, inventory balance and, assuming that the errors were discovered after the 2016 financial statements were issued, analyze the effect of the errors on 2016 cost of…
(Inventoriable Goods and Costs) In your audit of Jose Oliva Company, you find that a physical inventory on December 31, 2017, showed merchandise with a cost of $441,000 was on hand at that date. You also discover the following items were all excluded from the $441,000.1. Merchandise of $61,000 which is held by Oliva on consignment. The consignor is the Max Suzuki Company.2. Merchandise costing $38,000 which was shipped by Oliva f.o.b. destination to a customer on December 31, 2017. The customer was expected to receive the merchandise on January 6, 2018.3. Merchandise costing $46,000 which was shipped by Oliva f.o.b. shipping point to a customer on December 29, 2017. The customer was scheduled to receive the merchandise on January 2, 2018.4. Merchandise costing $83,000 shipped by a vendor f.o.b. destination on December 30, 2017, and received by Oliva on January 4, 2018.5. Merchandise costing $51,000 shipped by a vendor f.o.b. shipping point on December 31, 2017, and received by Oliva on…
Chapter 5 Solutions
Financial Accounting: The Impact on Decision Makers
Ch. 5 - Merchandise Accounting Merchandise Inventory Raw...Ch. 5 - Inventory Valuation Specific identification method...Ch. 5 - Inventoriable Costs During the first month of...Ch. 5 - Perpetual and Periodic Inventory Systems Following...Ch. 5 - Missing Amounts in Cost of Goods Sold Model For...Ch. 5 - Purchase Discounts For each of the following...Ch. 5 - Working Backward: Gross Profit Ratio Acmes gross...Ch. 5 - Inventory Costing Methods VanderMeer Inc. reported...Ch. 5 - Cost of Goods Sold, FIFO, and LIFO Kramer began...Ch. 5 - Comparison of Inventory Costing Methods—Periodic...
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