INTERMEDIATE ACCT VOL.2>CUSTOM<
9th Edition
ISBN: 9781307165067
Author: SPICELAND
Publisher: MCG/CREATE
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Textbook Question
Chapter 8, Problem 8.15E
Comparison of FIFO and LIFO; periodic system
• LO8–1, LO8–4
Alta Ski Company’s inventory records contained the following information regarding its latest ski model. The company uses a periodic inventory system.
| Beginning inventory, January 1, 2018 | 600 units @ $80 each |
| Purchases: | |
| January 15 | 1,000 units @ $95 each |
| January 21 | 800 units @ $100 each |
| Sales: | |
| January 5 | 400 units @ $120 each |
| January 22 | 800 units @ $130 each |
| January 29 | 400 units @ $135 each |
| Ending inventory, January 31, 2018 | 800 units |
Required:
1. Which method, FIFO or LIFO, will result in the highest cost of goods sold figure for January 2018? Why? Which method will result in the highest ending inventory balance? Why?
2. Compute cost of goods sold for January and the ending inventory using both the FIFO and LIFO methods.
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8–6
Various inventory costing methods; gross profit ratio
● LO8–1, LO8–4, LO8–7
Topanga Group began operations early in 2024. Inventory purchase information for the quarter ended March 31, 2024, for Topanga’s only product is provided below. The unit costs include the cost of freight. The company uses a periodic inventory system to report inventory and cost of goods sold.
Date of Purchase
Units
Unit Cost
Total Cost
Jan. 7
5,000
$4.00
$20,000
Feb. 16
12,000
4.50
54,000
March 22
17,000
5.00
85,000
Total purchases
34,000
$159,000
Sales for the quarter, all at $7.00 per unit, totaled 20,000 units leaving 14,000 units on hand at the end of the quarter.
Required:
Calculate Topanga’s gross profit ratio for the first quarter using:
FIFO
LIFO
Average cost
Comment on the relative effect of each of the three inventory methods on the gross profit ratio.
P6.11 (LO 6), AP Rayre Books uses the retail inventory method to estimate its monthly ending invento-
ries. The following information is available for two of its departments at October 31, 2022.
Hardcovers Paperbacks
Cost Retail Cost Retail
Beginning inventory $ 420,000 $ 640,000 $ 280,000 $ 360,000
Purchases 2,135,000 3,200,000 1,155,000 1,540,000
Freight-in 24,000 12,000
Purchase discounts 44,000 22,000
Net sales 3,100,000 1,570,000
At December 31, Rayre Books takes a physical inventory at retail. The actual retail values of the inven-
tories in each department are Hardcovers $744,000 and Paperbacks $335,000.
Instructions
a. Determine the estimated cost ofthe ending inventory for each department at October 31, 2022,
using the retail inventory method.
b. Compute the ending inventory at cost for each department atDecember 31, assuming the cost-to-
retail ratios for the year are 65% for Hardcovers and 75% for Paperbacks.
E9.3B (L0 1) (LCNRV) Sunshine Company follows the practice of pricing its inventory at LCNRV, on an individual-item basis.
Item No.
Quantity
Cost per Unit
Cost to Replace
Estimated
Selling Price
Cost of Completion and Disposal
Normal
Profi t
A
1,200
$8.10
$8.00
$9.00
$0.35
$0.90
B
600
6.00
5.60
6.00
0.45
0.50
C
200
5.50
5.00
7.00
0.40
1.00
D
700
7.25
7.50
8.00
0.50
0.90
E
1,000
2.10
2.00
2.80
0.65
0.20
F
500
4.05
4.00
5.00
0.40
0.75
G
2,000
8.75
8.15
9.00
0.60
0.50
H
300
9.95
9.00
10.50
0.30
1.00
Instructions
From the information above,
determine the amount of Sunshine Company inventory using the LCNRV method.
determine the amount of Sunshine Company inventory using the LCM method.
Chapter 8 Solutions
INTERMEDIATE ACCT VOL.2>CUSTOM<
Ch. 8 - Describe the three types of inventory of a...Ch. 8 - What is the main difference between a perpetual...Ch. 8 - The Cloud Company employs a perpetual inventory...Ch. 8 - The Bockner Company shipped merchandise to Laetner...Ch. 8 - What is a consignment arrangement? Explain the...Ch. 8 - Prob. 8.6QCh. 8 - The Esquire Company employs a periodic inventory...Ch. 8 - Prob. 8.8QCh. 8 - Its common in the electronics industry for unit...Ch. 8 - Explain why proponents of LIFO argue that it...
Ch. 8 - Prob. 8.11QCh. 8 - Describe the ratios used by financial analysts to...Ch. 8 - Prob. 8.13QCh. 8 - Prob. 8.14QCh. 8 - The Austin Company uses the dollar-value LIFO...Ch. 8 - Identify any differences between U.S. GAAP and...Ch. 8 - Determining ending inventory; periodic system ...Ch. 8 - Prob. 8.2BECh. 8 - Prob. 8.3BECh. 8 - Purchas e discounts; gross method LO83 On...Ch. 8 - Prob. 8.5BECh. 8 - Prob. 8.6BECh. 8 - Inventor y cost flow methods; perpetual system ...Ch. 8 - LIFO method LO84 Esquire Inc. uses the LIFO...Ch. 8 - LIFO method LO84 AAA Hardware uses the LIFO...Ch. 8 - LIFO liquidation LO86 Refer to the situation...Ch. 8 - Prob. 8.11BECh. 8 - Ratio analysis LO87 Selected financial statement...Ch. 8 - Dollar-value LIFO LO88 At the beginning of 2018,...Ch. 8 - Perpetual inventory system; journal entries LO81...Ch. 8 - Prob. 8.2ECh. 8 - Determining cost of goods sold; periodic inventory...Ch. 8 - Perpetual and periodic inventory systems compared ...Ch. 8 - Prob. 8.6ECh. 8 - Goods in transit; consignment LO82 The December...Ch. 8 - Physical quantities and costs included in...Ch. 8 - Prob. 8.9ECh. 8 - Prob. 8.10ECh. 8 - Prob. 8.11ECh. 8 - FASB codification research LO82, LO83 Access the...Ch. 8 - Inventory cost flow methods; periodic system ...Ch. 8 - Inventory cost flow methods; perpetual system ...Ch. 8 - Comparison of FIFO and LIFO; periodic system ...Ch. 8 - Average cost method; periodic and perpetual...Ch. 8 - FIFO, LIFO, and average cost methods LO81, LO84...Ch. 8 - Supplemental LIFO disclosures; LIFO reserve; AEP...Ch. 8 - LIFO liquidation LO81, LO84, LO86 The Reuschel...Ch. 8 - Dollar-value LIFO LO88 On January 1, 2018, the...Ch. 8 - Dollar-value LIFO LO88 Mercury Company has only...Ch. 8 - Dollar-value LIFO LO88 Carswell Electronics...Ch. 8 - Concepts; terminology LO81 through LO85 Listed...Ch. 8 - Various inventory transactions; journal entries ...Ch. 8 - Prob. 8.2PCh. 8 - Prob. 8.4PCh. 8 - Various inventory costing methods LO81, LO84...Ch. 8 - Various inventory costing methods LO81, LO84...Ch. 8 - Supple mental LIFO disclosures; Caterpillar LO84,...Ch. 8 - LIFO liquidation LO84, LO86 Taylor Corporation...Ch. 8 - LIFO liquidation LO84, LO86 Cansela Corporation...Ch. 8 - Prob. 8.11PCh. 8 - Integrating problem; inventories and accounts...Ch. 8 - Dollar-value LIFO LO88 On January 1, 2018, the...Ch. 8 - Dollar-value LIFO LO88 Kingston Company uses the...Ch. 8 - Dollar-value LIFO LO88 On January 1, 2018,...Ch. 8 - Prob. 8.1BYPCh. 8 - Real World Case 82 Physical quantities and costs...Ch. 8 - Judgment Case 83 The specific identification...Ch. 8 - Prob. 8.4BYPCh. 8 - Prob. 8.5BYPCh. 8 - Judgment Case 86 Goods in transit LO82 At the end...Ch. 8 - Ethics Case 87 Profit manipulation LO84 In 2017...Ch. 8 - Real World Case 88 Effects of inventory valuation...Ch. 8 - Real World Case 89 Effects of inventory valuation...Ch. 8 - Communication Case 810 Dollar-value LIFO method ...Ch. 8 - Prob. 8.11BYPCh. 8 - Prob. 8.CCTCCh. 8 - Prob. CCIFRS
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