South-western Federal Taxation 2018: Individual Income Taxes
41st Edition
ISBN: 9781337385886
Author: William H. Hoffman, James C. Young, William A. Raabe, David M. Maloney, Annette Nellen
Publisher: Cengage Learning
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Chapter 8, Problem 1RP
To determine
Write a letter to CM in that explains whether the cost of inventory management program can be expensed in the purchase year.
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Exercise 6-1
Umatilla Bank and Trust is considering giving Sage Hill Inc. a loan. Before doing so, it decides that further discussions with Sage Hill Inc's accountant may be desirable. One area of particular concern is the Inventory account, which has
year-end balance of $253,760. Discussions with the accountant reveal the following.
1. Sage Hill Inc. sold goods costing $55,290 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until January 12. The goods were not induded in the physical inventory because the
were not in the warehouse.
2. The physical count of the inventory did not indude goods costing $96,030 that were shipped to Sage Hill Inc. FOB…
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[The following information applies to the questions displayed below.]
FindMe Incorporated, (FI) has developed a coin-sized tracking tag that attaches to key rings, wallets, and other items and
can be prompted to emit a signal using a smartphone app. Fl sells these tags, as well as water-resistant cases for the tags.
with terms FOB shipping point. Assume FI has no inventory at the beginning of the month, and it has outsourced the
production of its tags and cases. Fl uses FIFO and has entered into the following transactions:
January 2 FI purchased and received 320 tags from Xioasi Manufacturing (XM) at a cost of $11 per tag, n/15.
January 4 FI purchased and received 120 cases from Bachittar Products (BP) at a cost of $4 per case, n/20.
January 6 FI paid cash for the tags purchased from XM on January 2.
January 8 FI mailed 220 tags via the U.S. Postal Service (USPS) to customers at a price of $36 per tag, on account.
January 11 FI purchased and received 420 tags from…
Suppose you work for a company that sells computers and that you have been asked to oversee doing a physical count and valuation of the inventory at year end. You determine the value of inventory on hand to be $23,500 yet according to the Inventory account in the ledger the balance should be $35,000. give two reasons that could explain why the balances are not the same and what journal entry would need to be recorded in the books?
Chapter 8 Solutions
South-western Federal Taxation 2018: Individual Income Taxes
Ch. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - LO.2 Robert purchased and placed in service...Ch. 8 - LO.2 Jim owns a very large ranch. A large part of...Ch. 8 - Prob. 10DQ
Ch. 8 - Prob. 12DQCh. 8 - Discuss the definition of business income as it is...Ch. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 21CECh. 8 - Prob. 22CECh. 8 - Prob. 23CECh. 8 - Prob. 24CECh. 8 - Prob. 25CECh. 8 - Prob. 26CECh. 8 - Prob. 27CECh. 8 - Prob. 28CECh. 8 - Prob. 29CECh. 8 - Prob. 30CECh. 8 - Prob. 31PCh. 8 - Prob. 32PCh. 8 - Prob. 33PCh. 8 - Prob. 34PCh. 8 - Prob. 35PCh. 8 - Prob. 36PCh. 8 - Prob. 37PCh. 8 - Prob. 38PCh. 8 - Prob. 39PCh. 8 - Prob. 40PCh. 8 - Prob. 41PCh. 8 - Prob. 42PCh. 8 - Prob. 43PCh. 8 - Prob. 44PCh. 8 - Prob. 45PCh. 8 - Prob. 46PCh. 8 - Prob. 47PCh. 8 - Prob. 48PCh. 8 - Prob. 49PCh. 8 - Prob. 50PCh. 8 - Prob. 51PCh. 8 - LO.2, 5, 9 Jamie purchased 100,000 of new office...Ch. 8 - Prob. 53PCh. 8 - Prob. 54PCh. 8 - Prob. 55PCh. 8 - Prob. 56PCh. 8 - Prob. 57CPCh. 8 - Prob. 58CPCh. 8 - Prob. 1RPCh. 8 - Prob. 2RPCh. 8 - Prob. 3RPCh. 8 - Michael Sima, a sole proprietor craftsman,...Ch. 8 - Cox Construction, a company in its 10th year of...Ch. 8 - Stem Corp. bought a machine in February of year 7...Ch. 8 - Prob. 4CPACh. 8 - Data, Inc., purchased and placed in service a...Ch. 8 - Data, Inc., purchased and placed in service 5,000...Ch. 8 - Which statement below is correct? a. Real property...
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- A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure? A. No changes would be made since the person paying the bills is different from the person ordering the inventory. B. The person in accounts payable should generate the purchase order. C. The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received. D. The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.arrow_forwardYou are the financial officer for Music Plus, a retailer that sells goods for home entertainment needs. The business owner, Vic Velakturi, recently reviewed the annual financial statements you prepared and sent you an e-mail stating that he thinks you overstated net income. He explains that although he has invested a great deal in security, he is sure shoplifting and other forms of inventory shrinkage have occurred, but he does not see any deduction for shrinkage on the income statement. The store uses a perpetual inventory system. Required Prepare a brief memorandum that responds to the owner’s concerns.arrow_forwardQT, Inc., and Elppa Computers, Inc., compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions): QT Elppa Sales $56,940 $120,357 Cost of merchandise sold 44,754 92,385 Inventory, beginning of period 1,382 6,317 Inventory, end of period 1,404 7,490 a. Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory. Round your calculations and answers to one decimal place. Assume 365 days a year. QT Elppa 1. Inventory turnover fill in the blank 1 fill in the blank 2 2. Number of days' sales in inventory…arrow_forward
- QT, Inc., and Elppa Computers, Inc., compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions): QT Elppa Sales $56,940 $120,357 Cost of merchandise sold 44,754 92,385 Inventory, beginning of period 1,382 6,317 Inventory, end of period 1,404 7,490 a. Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory. Round your calculations and answers to one decimal place. Assume 365 days a year. QT Elppa 1. Inventory turnover fill in the blank 1 fill in the blank 2 2. Number of days' sales in inventory…arrow_forwardWhen Mookie The Beagle Concierge started stocking Mookie The Beagle Concierge branded inventory. Cy rented a centrally located storage locker with digital access. This permits Mookie The Beagle Concierge contractors to access the storage locker for deliveries to customers. Cy has digital surveillance and from his smartphone can electronically permit the contractors access when they arrive at the storage locker. In addition, all inventory has an RFID chip that is automatically read when the contractor passes the storage locker door to exit. This feature improves inventory control in that Cy is immediately notified on his smartphone when any inventory is removed from the storage locker. The storage locker streamlines operations. The only issue is that Cy overlooked recording the storage locker rental in QBO. Complete the following adjusting entry for Mookie The Beagle Concierge. In anticipation of stocking Mookie The Beagle Concierge branded inventory. Cy charged $864 for 6 months…arrow_forwardFirst Bank is considering giving Ivanhoe Company a loan. First, however, it decides that it would be a good idea to have further discussions with Ivanhoe's accountant. One area of particular concern is the inventory account, which has a December 31 balance of $241,660. Discussions with the accountant reveal the following: 1. 2. 4. 3. On December 31, Flint Company had $26,230 of goods held on consignment for Ivanhoe. The goods were not included in Ivanhoe's ending inventory balance. The physical count of the inventory did not include goods that cost $81,700 that were shipped to Ivanhoe, FOB shipping point, on December 27 and were still in transit at year end. Determine the correct inventory amount at December 31. Ivanhoe sold goods that cost $30,100 to Pharoah Company, FOB destination, on December 28. The goods are not expected to arrive at their destination in India until January 12. The goods were not included in the physical inventory because they were not in the warehouse. The…arrow_forward
- QT, Inc. and Elppa Computers, Inc. compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions): QT ElppaSales $56,940 $120,357Cost of goods sold 44,754 92,385Inventory, beginning of period 1,382 6,317Inventory, end of period 1,404 7,490a. Determine for both companies (1) the inventory turnover and (2) the…arrow_forwardSome grocery stores are experimenting with a new technology that allows customers toscan items as they shop. Once the customer is done, he or she completes the transaction onlineand never has to stand in the checkout line. On March 11, 2012The Boston Globereported thatModiv Media’s scan-it-yourself technology [is installed] in about 350 Stop & Shopand Giant stores in the United States. Many consumers have embraced the system;Stop & Shop spokeswoman Suzi Robinson said the service handles about one milliontransactions per month. Estimate the number of customers per day per store who use this self-scanning technology"arrow_forwardI. Street Bank is considering giving Fallen Company a loan. Before doing so, it decides that further discussions with Fallen's accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $375,000. Discussions with the accountant reveal the following. 1. Fallen sold goods costing $55,000 to White Company FOB shipping point on December 28. The goods are not expected to reach White until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $95,000 that were shipped to Fallen FOB destination on December 27 and were still in transit at year-end. 3. Fallen received goods costing $15,000 on January 2. The goods were shipped FOB shipping point on December 26 by Lynch Co. The goods were not included in the physical count. 4. Fallen sold goods costing $41,000 to Benet of Canada FOB destination on December 30. The goods…arrow_forward
- Wares king supplies custom-fitted curtains and blinds to retail customers. It has recently expanded tooffer a wide variety of home decorating products through its six stores across the state. After someinitial problems with stock control, it installed a new automated inventory system in April this year.The system replaced another automated system that had been modified so often over the years thatthe auditor had advised Wares’ management that they did not regard it as reliable. That is, theauditor was unable to rely on the old system sufficiently to assess control risk for inventory as anythingless than high.Required:a) Explain the normal process an auditor would expect to find in the client’s systems governingchanges to computer programs. Why is an auditor concerned about program changes? b) Wares kings’ financial year-end is 31 December. Does the auditor need to obtain evidence aboutthe performance of the inventory control system from every month in the year or from a sampleof…arrow_forwardTri-State Bank and Trust is considering giving Cheyenne Corp. a loan. Before doing so, management decides that further discussions with Cheyenne’s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $303,500. Discussions with the accountant reveal the following. 1. Cheyenne shipped goods costing $32,400 to Sorci Company, FOB shipping point, on December 28. The goods are not expected to arrive at Sorci until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $91,000 that were shipped to Cheyenne FOB destination on December 27 and were still in transit at year-end. 3. Cheyenne received goods costing $29,800 on January 2. The goods were shipped FOB shipping point on December 26 by Solita Co. The goods were not included in the physical count. 4. Cheyenne shipped goods costing $44,000…arrow_forwardHardcase Luggage Shop is a small retail establishment located in a large shopping mall. This shop has implemented the following procedures regarding inventory items:a. Because the shop carries mostly high-quality, designer luggage, all inventory items are tagged with a control device that activates an alarm if a tagged item is removed from the store.b. Because the display area of the store is limited, only a sample of each piece of luggage is kept on the selling floor. Whenever a customer selects a piece of luggage, the salesclerk gets the appropriate piece from the store’s stockroom. Because all salesclerks need access to the stockroom, it is not locked. The stockroom is adjacent to the break room used by all mall employees.c. Whenever Hardcase Luggage Shop receives a shipment of new inventory, the items are taken directly to the stockroom. Hardcase’s accountant uses the vendor’s invoice to record the amount of inventory received.State whether each of these procedures is appropriate…arrow_forward
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