BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

Solutions

Chapter
Section
BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
1 views

Inventory Costing and LCM

J&J Enterprises sells paper cups to fast-food franchises. On January 1, 2019, J&J had 5,000 cups on hand, for which it had paid $0.10 per cup. During 2019, J&J made the following purchases and sales:

Chapter 6, Problem 70BPSB, Inventory Costing and LCM J&J Enterprises sells paper cups to fast-food franchises. On January 1,

During 2019, J&J sold 240,000 cups at $0.35 per cup (80,000 cups were sold on April 2 and 160,000cups were sold on October 20), leaving an ending inventory of 7,000 cups. Assume that J&J uses a perpetual inventory system. J&J uses the lower of cost or market for its inventories, as required by generally accepted accounting principles.

Required:

1. Assume that the market value of the cups is $0.38 per cup on December 31, 2019. Compute the cost of ending inventory using the FIFO and average cost methods, and then apply LCM. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.)

2. Assume that the market value of the cups is $0.12 per cup on December 31, 2019. Compute the cost of ending inventory using the FIFO and average cost methods, and then apply LCM. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.)

To determine

(a)

Introduction:

The first in, first out (FIFO) method of inventory valuation is a cost stream supposition that the first products obtained are likewise the first merchandise sold. In many organizations, this presumption intently coordinates the genuine stream of merchandise, as is viewed as the most hypothetically right inventory valuation method.

The average cost method is an inventory costing method in which the cost of every thing in an inventory is determined on the basis of the average cost of every comparative great in the inventory. The average cost method is determined by partitioning the cost of products in inventory by the absolute number of things accessible available to be purchased.

To compute:

Assume that the market value of the cups is $0.38 per cup on December 31, 2019. Compute the cost of ending inventory using the FIFO and average cost methods, and then apply LCM.

Explanation

In this method, first in first out means first received stock firstly sold.

Closing inventory 7000 units is only out of 85000 units

Value of closing stock = 7000 units × 0.15 = 1050

(Market value 0.38 or cost 0.15 whichever is lower)

In this method, average cost method

Calculate average cost = 0

To determine

(b)

Introduction:

The first in, first out (FIFO) method of inventory valuation is a cost stream supposition that the first products obtained are likewise the first merchandise sold. In many organizations, this presumption intently coordinates the genuine stream of merchandise, as is viewed as the most hypothetically right inventory valuation method.

The average cost method is an inventory costing method in which the cost of every thing in an inventory is determined on the basis of the average cost of every comparative great in the inventory. The average cost method is determined by partitioning the cost of products in inventory by the absolute number of things accessible available to be purchased.

To compute:

Assume that the market value of the cups is $0.12 per cup on December 31, 2019. Compute the cost of ending inventory using the FIFO and average cost methods, and then apply LCM.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Why is understanding motivation important?

Foundations of Business (MindTap Course List)

Explain the differences among data, information, and a database.

Database Systems: Design, Implementation, & Management

What is a relationship, and what three types of relationships exist?

Database Systems: Design, Implementation, & Management

What is the first thing that should be disconnected when removing a fuel tank?

Automotive Technology: A Systems Approach (MindTap Course List)

Give examples of practices that you need to follow to be successful in college.

Engineering Fundamentals: An Introduction to Engineering (MindTap Course List)

Briefly explain the purpose of a sampling plan.

Precision Machining Technology (MindTap Course List)

Determine the clamping force at A due to the 15-lb horizontal force applied to the handle at E.

International Edition---engineering Mechanics: Statics, 4th Edition

What is the speed of the Internet connection on the computer or mobile device you currently are using?

Enhanced Discovering Computers 2017 (Shelly Cashman Series) (MindTap Course List)