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Allen Company is a wholesale distributor of automotive replacement parts. Initial amounts taken from Allen’s accounting records are as follows: Accounts payable at December 31, 2019: Additional information is as follows: 1. Parts held on consignment from Charlie to Allen, the consignee, amounting to $155,000 were included in the physical count of goods in Allen’s warehouse on December 31, 2019, and in accounts payable at December 31, 2019. 2. $22,000 of parts, which were purchased from Full and paid for in December 2019, were sold in the last week of 2019 and appropriately recorded as sales of $28,000. The parts were included in the physical count of goods in Allen’s warehouse on December 31, 2019, because the parts were on the loading dock waiting to be picked up by customers. 3. Parts in transit to customers on December 31, 2019, shipped FOB shipping point on December 28, 2019, amounted to $34,000. The customers received the parts on January 7, 2020. Sales of $40,000 to the customers for the parts were recorded by Allen on January 3, 2020. 4. Retailers were holding $210,000 at cost ($250,000 at retail) of goods on consignment from Allen, the consignor, at their stores on December 31, 2019. 5. Goods were in transit from Greg to Allen on December 31, 2019. The cost of the goods was $25,000, and they were shipped FOB shipping point on December 29, 2019. 6. A quarterly freight bill in the amount of $2,000 specifically relating to merchandise purchases in December 2019, all of which was still in the inventory at December 31, 2019, was received on January 4, 2020. The freight bill was not included in either the inventory or in accounts payable at December 31, 2019. 7. All of the purchases from Baker occurred during the last 7 days of the year. These items have been recorded in accounts payable and accounted for in the physical inventory at cost before discount. Allen’s policy is to pay invoices in time to take advantage of all cash discounts, adjust inventory accordingly, and record accounts payable, net of cash discounts. Required: Prepare a schedule of adjustments to the initial amounts of inventory, accounts payable, and sales. Show the effect, if any, of each of the transactions separately and indicate if the transactions would have no effect on the amount.

BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281

Solutions

Chapter
Section
Chapter 7, Problem 17P
Textbook Problem

Allen Company is a wholesale distributor of automotive replacement parts. Initial amounts taken from Allen’s accounting records are as follows:

Chapter 7, Problem 17P, Allen Company is a wholesale distributor of automotive replacement parts. Initial amounts taken from , example  1

Accounts payable at December 31, 2019:

Chapter 7, Problem 17P, Allen Company is a wholesale distributor of automotive replacement parts. Initial amounts taken from , example  2

Additional information is as follows:

  1. 1. Parts held on consignment from Charlie to Allen, the consignee, amounting to $155,000 were included in the physical count of goods in Allen’s warehouse on December 31, 2019, and in accounts payable at December 31, 2019.
  2. 2. $22,000 of parts, which were purchased from Full and paid for in December 2019, were sold in the last week of 2019 and appropriately recorded as sales of $28,000. The parts were included in the physical count of goods in Allen’s warehouse on December 31, 2019, because the parts were on the loading dock waiting to be picked up by customers.
  3. 3. Parts in transit to customers on December 31, 2019, shipped FOB shipping point on December 28, 2019, amounted to $34,000. The customers received the parts on January 7, 2020. Sales of $40,000 to the customers for the parts were recorded by Allen on January 3, 2020.
  4. 4. Retailers were holding $210,000 at cost ($250,000 at retail) of goods on consignment from Allen, the consignor, at their stores on December 31, 2019.
  5. 5. Goods were in transit from Greg to Allen on December 31, 2019. The cost of the goods was $25,000, and they were shipped FOB shipping point on December 29, 2019.
  6. 6. A quarterly freight bill in the amount of $2,000 specifically relating to merchandise purchases in December 2019, all of which was still in the inventory at December 31, 2019, was received on January 4, 2020. The freight bill was not included in either the inventory or in accounts payable at December 31, 2019.
  7. 7. All of the purchases from Baker occurred during the last 7 days of the year. These items have been recorded in accounts payable and accounted for in the physical inventory at cost before discount. Allen’s policy is to pay invoices in time to take advantage of all cash discounts, adjust inventory accordingly, and record accounts payable, net of cash discounts.

Required:

Prepare a schedule of adjustments to the initial amounts of inventory, accounts payable, and sales. Show the effect, if any, of each of the transactions separately and indicate if the transactions would have no effect on the amount.

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Chapter 7 Solutions

Intermediate Accounting: Reporting And Analysis
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Ch. 7 - How, and under what conditions, does a company...Ch. 7 - Consider each of the following independent...Ch. 7 - Describe the key concept in determining the cost...Ch. 7 - Distinguish between product and period costs.Ch. 7 - Discuss the advantages and disadvantages of the...Ch. 7 - Why does the application of the FIFO, average...Ch. 7 - The costs of which units of cost of goods...Ch. 7 - Discuss the LIFO cost flow assumption. Under what...Ch. 7 - During a period of rising costs, indicate whether...Ch. 7 - Which cost flow assumption, LIFO or FIFO, produces...Ch. 7 - Discuss the LIFO and FIFO cost flow assumptions...Ch. 7 - Explain the issue of inventory liquidation when a...Ch. 7 - What factors might influence management's...Ch. 7 - List the acceptable cost flow assumptions under...Ch. 7 - What are the advantages of dollar value LIFO as...Ch. 7 - Explain the dollar-value LIFO method of inventory...Ch. 7 - Describe the double-extension and link-chain...Ch. 7 - What types of information do companies disclose...Ch. 7 - What is a LIFO reserve?Ch. 7 - What is the impact of LIFO inventory liquidation...Ch. 7 - Goods on consignment should be included in the...Ch. 7 - The following items were included in Venicio...Ch. 7 - During 2019, R Corp., a manufacturer of chocolate...Ch. 7 - Dixon Menswear Shop purchased shirts from Colt...Ch. 7 - The moving average inventory cost flow assumption...Ch. 7 - The cost of the inventory on January 31, 2019,...Ch. 7 - Questions M7-6 and M7-7 are based on the following...Ch. 7 - Assuming no beginning inventory, what can be said...Ch. 7 - On December 31, 2018, Kern Company adopted the...Ch. 7 - When the double-extension approach to the...Ch. 7 - On December 31, Pitts Manufacturing Company...Ch. 7 - On January 1, Pope Enterprises inventory was...Ch. 7 - Reid Company uses the periodic inventory system....Ch. 7 - Billings Company uses a periodic inventory system....Ch. 7 - Dani Corporation signed a binding commitment on...Ch. 7 - Stevens Company uses a perpetual inventory system....Ch. 7 - RE7-6 Stevens Company uses a perpetual inventory...Ch. 7 - Johnson Company uses a perpetual inventory system....Ch. 7 - RE7-8 Johnson Company uses a perpetual inventory...Ch. 7 - Jessie Stores uses the periodic system of...Ch. 7 - Jessie Stores uses the periodic system of...Ch. 7 - Carla Company uses the perpetual inventory system....Ch. 7 - Carla Company uses the perpetual inventory system....Ch. 7 - On January 1 of Year 1, Dorso Company adopted the...Ch. 7 - An evaluation of Bryces Bookstores inventory was...Ch. 7 - Inventory Accounts for a Manufacturing Company...Ch. 7 - Applying the Cost of Goods Sold Model The...Ch. 7 - Perpetual versus Periodic Inventory Systems Graham...Ch. 7 - Determining Net Purchases The following amounts...Ch. 7 - Perpetual versus Periodic Inventory Systems...Ch. 7 - Goods in Transit Gravais Company made two...Ch. 7 - Items Included in Inventory The following are...Ch. 7 - Loss on Purchase Commitment During 2019, Boge...Ch. 7 - Discounts Hirsch Company buys inventory for 20,000...Ch. 7 - Discounts Nelson Company bought inventory for...Ch. 7 - Alternative Inventory Methods Nevens Company uses...Ch. 7 - Alternative Inventory Methods Park Companys...Ch. 7 - Alternative Inventory Methods Frate Company was...Ch. 7 - LIFO, Perpetual and Periodic Riedel Companys...Ch. 7 - Habicht Company was formed in 2018 to produce a...Ch. 7 - Dollar-Value LIFO A company adopted the LIFO...Ch. 7 - On January 1, 2018, Sato Company adopted the...Ch. 7 - Dollar-Value LIFO Beistock Company manufactures...Ch. 7 - Acute Company manufactures a single product. On...Ch. 7 - Inventory Pools Stone Shoe Company adopted...Ch. 7 - Grimstad Company uses FIFO for internal reporting...Ch. 7 - LIFO and Interim Financial Reports Assume prices...Ch. 7 - Applying the Cost of Goods Sold Model The...Ch. 7 - Items to Be Included in Inventory As the auditor...Ch. 7 - Valuation of Inventory The inventory on hand at...Ch. 7 - Discounts On April 11, Edwards Construction...Ch. 7 - Cost of Goods Sold As an accountant for Lee...Ch. 7 - Alternative Inventory Methods Garrett Company has...Ch. 7 - Totman Company has the following transactions...Ch. 7 - Comprehensive The following information for 2019...Ch. 7 - LIFO Liquidation Profit Hammond Company adopted...Ch. 7 - LIFO and Inventory Pools On January 1, 2016,...Ch. 7 - Olson Company adopted the dollar-value LIFO method...Ch. 7 - Dollar-Value LIFO Kwestel Company adopted the...Ch. 7 - Webster Company adopted do liar-value LIFO on...Ch. 7 - Dollar-Value LIFOComprehensive Kelly Company...Ch. 7 - On January 1, 2019, Lucas Distributors Inc....Ch. 7 - Inventory Valuation You are engaged in an audit of...Ch. 7 - Allen Company is a wholesale distributor of...Ch. 7 - FIFO and LIFO A company may compute inventory...Ch. 7 - Purchase Discounts, FIFO, and LIFO Taylor Company,...Ch. 7 - In January, Broome Inc. requested and secured...Ch. 7 - Purchase Discounts Auge Company annually purchases...Ch. 7 - The 1970s were a period of historically high...Ch. 7 - Interpretation of GAAP and Ethical Issues Robin...Ch. 7 - Selection of an Inventory Method and Ethical...Ch. 7 - Analyzing Starbuckss Inventory Disclosures Obtain...Ch. 7 - Fenimore Manufacturing Company uses the average...

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