FUNDAMENTALS OF ADVANCED ACCOUNTING >I
6th Edition
ISBN: 9781307007350
Author: Hoyle
Publisher: MCG/CREATE
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Textbook Question
Chapter 5, Problem 5Q
James, Inc., sells inventory to Matthews Company, a related party, at James’s standard gross profit rate. At the current fiscal year-end, Matthews still holds some portion of this inventory. If consolidated financial statements are prepared, why are worksheet entries required in two different fiscal periods?
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Students have asked these similar questions
Below is the net income of Anita Ferreri Instrument Co., a private corporation, computed under the three inventory methods using a periodic system.
FIFO
Average-Cost
LIFO
2018
$26,000
$24,000
$20,000
2019
30,000
25,000
21,000
2020
28,000
27,000
24,000
2021
34,000
30,000
26,000
Instructions
(Ignore tax considerations.)
a. Assume that in 2021 Ferreri decided to change from the FIFO method to the average-cost method of pricing inventories. Prepare the journal entry necessary for the change that took place during 2021, and show net income reported for 2018, 2019, 2020, and 2021.
b. Assume that in 2021 Ferreri, which had been using the LIFO method since incorporation in 2018, changed to the FIFO method of pricing inventories. Prepare the journal entry necessary to record the change in 2021 and show net income reported for 2018, 2019, 2020, and 2021.
Camille, Inc., sold $130,000 in inventory to Eckerle Company during 2020 for $250,000. Eckerle resold $89,000 of this merchandise in 2020 with the remainder to be disposed of during 2021. Assuming that Camille owns 20 percent of Eckerle and applies the equity method, what journal entry is recorded at the end of 2020 to defer the intra-entity gross profit? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)
Presented below are income statements prepared on a LIFO and FIFO basis for Kenseth Company, which started operations on January 1, 2019. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in 2020. The FIFO income statement is computed in accordance with the requirements of GAAP. Kenseth's profit-sharing agreement with its employees indicates that the company will pay employees 10% of income before profit-sharing. Income taxes are ignored.
LIFO Basis
FIFO Basis
2020
2019
2020
2019
Sales
$3,000
$3,000
$3,000
$3,000
Cost of goods sold
1,130
1,000
1,100
940
Operating expenses
1,000
1,000
1,000
1,000
Income before profit-sharing
870
1,000
900
1,060
Profit-sharing expense
87
100
96
100
Net income
$ 783
$ 900
$ 804
$ 960
Instructions
Answer the following questions.
a. If comparative income statements are prepared, what net…
Chapter 5 Solutions
FUNDAMENTALS OF ADVANCED ACCOUNTING >I
Ch. 5 - Prob. 1QCh. 5 - Prob. 2QCh. 5 - Prob. 3QCh. 5 - Prob. 4QCh. 5 - James, Inc., sells inventory to Matthews Company,...Ch. 5 - Prob. 6QCh. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 10Q
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Use the same information as in problem (5) except...Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - What is the total of consolidated cost of goods...Ch. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - What is the consolidated total for inventory at...Ch. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 1DYSCh. 5 - Prob. 2DYS
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