Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Question
Chapter 6, Problem 2AA
To determine
(1)
Absorption costing is a process that the company uses to allocate all types of costs on all products, and then calculates the final price of the products.
Variable costing considers only the variable costs and it is not used for external purpose. However, the company uses this method for their own internal management.
To compare: Income under variable costing and absorption costing for Company A.
To determine
(2)
Absorption costing is a process that the company uses to allocate all types of costs on all products, and then calculates the final price of the products.
Variable costing considers only the variable costs and it is not used for external purpose. However, the company uses this method for their own internal management.
To compare: Income under variable costing and absorption costing for Company G.
To determine
(3)
Just-in-time Inventory System: It means increasing the efficiency of the inventory system by aligning the raw material required from suppliers directly to the material required in the production. This reduces the inventory costs.
To compare: Income under absorption and variable costing if ‘Just-in-time’ (JIT) inventory system is used.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2016 decided to change to the FIFO method. The inventory as reported at the end of 2015 using LIFO would have been $20 million higher using FIFO. Retained earnings reported at the end of 2014 and 2015 was $240 million and $260 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $250 million and $272 million, respectively. 2015 net income reported at the end of 2015 was $28 million (LIFO method) but would have been $30 million using FIFO. After changing to FIFO, 2016 net income was $36 million. Dividends of $8 million were paid each year. The tax rate is 40%. Required: 1. Prepare the journal entry at the beginning of 2016 to record the change in accounting principle. 2. In the 2016–2015 comparative income statements, what will be the amounts of net income reported for 2015 and 2016? 3. Prepare the 2016–2015 retained earnings column of the…
Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided tochange to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $20 million higher using FIFO.Retained earnings reported at the end of 2016 and 2017 was $240 million and $260 million, respectively(reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $250 million and$272 million, respectively. 2017 net income reported at the end of 2017 was $28 million (LIFO method) butwould have been $30 million using FIFO. After changing to FIFO, 2018 net income was $36 million. Dividendsof $8 million were paid each year. The tax rate is 40%.Required:1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle.2. In the 2018–2017 comparative income statements, what will be the amounts of net income reported for 2017and 2018?3. Prepare the 2018–2017 retained earnings column of the comparative…
Please refer to the picture below for the information. Please show the complete solution and kinldy include label. Thank you so much.
Question 1: How much is the amount of "Cost of Goods Sold" to be reported in the 2015 Statement of comprehensive income assuming the company’s policy is to charge loss on inventory write-down to COST OF GOODS SOLD and charge loss on inventory write-down to OTHER EXPENSE, respectively.
Question 2: How much is the amount of "Cost of Goods Sold" to be reported in the 2016 Statement of comprehensive income?
Chapter 6 Solutions
Managerial Accounting
Ch. 6 - Prob. 1MCQCh. 6 - Prob. 2MCQCh. 6 - Prob. 3MCQCh. 6 - Prob. 4MCQCh. 6 - Prob. 5MCQCh. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Prob. 4DQCh. 6 - Prob. 5DQ
Ch. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - Prob. 9DQCh. 6 - Prob. 10DQCh. 6 - Prob. 11DQCh. 6 - Prob. 12DQCh. 6 - Prob. 13DQCh. 6 - Prob. 14DQCh. 6 - Prob. 1QSCh. 6 - Prob. 2QSCh. 6 - Prob. 3QSCh. 6 - Prob. 4QSCh. 6 - Prob. 5QSCh. 6 - Prob. 6QSCh. 6 - Prob. 7QSCh. 6 - Prob. 8QSCh. 6 - Prob. 9QSCh. 6 - Prob. 10QSCh. 6 - Prob. 11QSCh. 6 - Prob. 12QSCh. 6 - Prob. 13QSCh. 6 - Prob. 14QSCh. 6 - Prob. 15QSCh. 6 - Prob. 16QSCh. 6 - Prob. 17QSCh. 6 - Prob. 18QSCh. 6 - Prob. 19QSCh. 6 - Prob. 20QSCh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - Prob. 6ECh. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 1PSACh. 6 - Prob. 2PSACh. 6 - Prob. 3PSACh. 6 - Prob. 1PSBCh. 6 - Prob. 2PSBCh. 6 - Prob. 3PSBCh. 6 - Prob. 6SPCh. 6 - Prob. 1AACh. 6 - Prob. 2AACh. 6 - Prob. 3AACh. 6 - Prob. 1BTNCh. 6 - Prob. 2BTNCh. 6 - Prob. 3BTNCh. 6 - Prob. 4BTNCh. 6 - Prob. 5BTNCh. 6 - Prob. 6BTN
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
- The management of Gresa Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-cost. The company requests your help in determining the results of operations for 2017 if either the FIFO or the LIFO method had been used. For 2017, the accounting records show these data: Inventories Purchases and Sales Beginning (7,000 units) $14,000 Total net sales (236,000 units) $1,038,400 Ending (21,000 units) Total cost of goods purchased (250,000 units) 596,500 Purchases were made quarterly as follows. Quarter Units Unit Cost Total Cost 1 65,000 $2.20 $143,000 2 55,000 2.30 126,500 3 55,000 2.40 132,000 4 75,000 2.60 195,000 250,000 $596,500 Operating expenses were $150,000, and the company’s income tax rate is 30%. Prepare comparative condensed income statements for 2017 under FIFO and…arrow_forwardIn 2016, Hopyard Lumber changed its inventory method from LIFO to FIFO. Inventory at the end of 2015 of $127,000 would have been $145,000 if FIFO had been used. Inventory at the end of 2016 is $162,000 using the new FIFO method but would have been $151,000 if the company had continued to use LIFO. Describe the steps Hopyard should take to report this change. What is the effect of the change on 2016 cost of goods sold?arrow_forwardThe manager of a superior products ltd. is considering shifting from the weighted average cost method for valuing inventory to either the first in first out method (FIFO) or last in last out (LIFO) method. The following information relates to the company's material inventory. UNIT UNIT COST January 1, 2016 (begining inventory) 800 $10.00 Purchases: January 5,2016 1500 $12.00 June 25,2016 1200 $12.50 September 12, 2016 600 $14.00 November 24, 2016 900 $15.50 A physical inventory taken in December 31,2016, showed 1500units on hand. Superior products uses a periodic inventory system. Prepare a…arrow_forward
- Goddard Company has used the FIFO method of inventory valuation since it began operations in 2013. Goddard decided to change to the average cost method for determining inventory costs at the beginning of 2016. The following schedule shows year-end inventory balances under the FIFO and average cost methods: Year FIFO Average Cost 2013 $45,000 $54,000 2014 78,000 71,000 2015 83,000 78,000 Required: 1. Ignoring income taxes, prepare the 2016 journal entry to adjust the accounts to reflect the average cost method. 2. How much higher or lower would cost of goods sold be in the 2015 revised income statement?arrow_forwardA) Assume that Chen uses the first-in, first-out method. Compute the cost of goods sold for 2015 and the ending inventory balance at December 31, 2015, for product A. B) Assume that Chen uses the last-in, first-out method. Compute the cost of goods sold for 2015 and the ending inventory balance at December 31, 2015, for product A. C) Assume that Chen uses the weighted-average cost method. Compute the cost of goods sold for 2015 and the ending inventory balance at December 31, 2015, for product A. Do not round until your final answers. Round your answers to the nearest dollar. Then, Assuming that Chen’s products are perishable items, which of the three inventory costing methods would you choose to: Assume this is during a period of rising costs. Reflect the likely goods flow through the business? Minimize income taxes for the period? Report the largest amount of net income for the period?arrow_forwardIf the company had used the FIFO inventory costing method, cost of goods sold under FIFO would have been $ 10,200.00. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the amount by which cost of goods sold under LIFO and AVCO is different from the FIFO cost of goods sold and ( 2) the effect on net income when LIFO and AVCO are used instead of FIFO. When costs are rising, what is the effect of the FIFO inventory valuation approach on cost of goods sold, gross profit and net income? Why?arrow_forward
- Samsung Electronics reports the following regarding its accounting for inventories. Inventories are stated at the lower of cost or net realizable value. Cost is determined using the average cost method, except for materials-in-transit. Inventories are reduced for the estimated losses arising from excess, obsolescence, and decline in value. This reduction is determined by estimating market value based on future customer demand. The losses on inventory obsolescence are recorded as a part of cost of sales. 1. What cost flow assumption(s) does Samsung apply in assigning costs to its inventories? 2. If at the current year-end there was an increase in the value of its inventories such that there was a reversal of W550 (W is Korean won) million for the write-down recorded in the prior year, how would Samsung account for this under IFRS? Would Samsung’s accounting be different for this reversal if it reported under U.S. GAAP? Explain.arrow_forwardWilliam Co. follows the practice of valuing its inventory at the lower-of-cost-or-market. The following information is available from the company’s inventory records as of December 31, 2017. Item Quantity Unit Cost ReplacementCost/Unit Estimated SellingPrice/Unit Completion & DisposalCost/Unit Normal ProfitMargin/Unit A 1,800 $9.15 $10.25 $12.81 $1.83 $2.20 B 1,500 10.00 9.64 11.47 1.10 1.46 C 1,700 6.83 6.59 8.78 1.40 0.73 D 1,700 4.64 5.12 7.69 0.98 1.83 E 2,100 7.81 7.69 8.17 0.85 1.22 Jane Doe is an accounting clerk in the accounting department of William Co., and she cannot understand why the market value keeps changing from replacement cost to net realizable value to something that she cannot even figure out. Jane is very confused, and she is the one who records inventory purchases and calculates ending inventory. You are the manager of…arrow_forwardWolfgang Kitchens has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2016, Wolfgang decided to change to the LIFO method. Net income in 2016 was correctly stated as $90 million. If the company had used LIFO in 2015, its cost of goods sold would have been higher by $7 million that year. Company accountants are able to determine that the cumulative net income for all years prior to 2015 would have been lower by $23 million if LIFO had been used all along, but have insufficient information to determine specific effects of using LIFO in 2014. Last year, Wolfgang reported the following net income amounts in its comparative income statements: ($ in millions) 2015 2014 2013 Net income $94 $92 $90 Required: 1. Prepare the journal entry at the beginning of 2016 to record the change in accounting principle. (Ignore income taxes.) 2. Briefly describe other steps Wolfgang will take to report the change. 3. What amounts will Wolfgang…arrow_forward
- Shown below are net income amounts as they would be determined by Roberti Steel Company by each of three different inventory costing methods ($ in thousands). FIFO Average Cost LIFO Pre-2023 $ 2,800 $ 2,540 $ 2,280 2023 750 600 540 $ 3,550 $ 3,140 $ 2,820 Assume that Roberti used FIFO before 2024, and then in 2024 decided to switch to LIFO. Assume accounting records are inadequate to determine LIFO information prior to 2024. Therefore, the 2023 ($540) and pre-2023 ($2,280) data are not available. Prepare the journal entry to record the change in accounting principle. (Ignore income tax effects.) Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in thousands (i.e., 10,000 should be entered as 10).arrow_forwardStiles Corporation uses the FIFO cost flow assumption and is in the process of applying the LCNRV rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product. Specific data for each product are as follows: Product A Product B Historical cost $80 $96 Replacement cost 71 98 Estimated cost of disposal 32 28 Estimated selling price 150 120 Required: What is the correct inventory value for each product? Product A $ per unit Product B $ per unitarrow_forwardSandhill Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2017, included product X. Relevant per-unit data for product X are as follows. Estimated selling price $51 Cost 42 Estimated selling costs 15 Normal profit 9 There were 920 units of product X on hand at December 31, 2017. Product X was incorrectly valued at $41 per unit for reporting purposes. All 920 units were sold in 2018.Compute the effect of this error on net income for 2017 and the effect on net income for 2018, and indicate the direction of the misstatement for each year.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
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