Judgment Case 8–3
The specific identification inventory method; inventoriable costs
• LO8–3, LO8–4
Happlia Co. imports household appliances. Each model has many variations and each unit has an identification number. Happlia pays all costs for getting the goods from the port to its central warehouse in Des Moines. After repackaging, the goods are consigned to retailers. A retailer makes a sale, simultaneously buys the appliance from Happlia, and pays the balance due within one week.
To alleviate the overstocking of refrigerators at a Minneapolis retailer, some were reshipped to a Kansas City retailer where they were still held in inventory at December 31, 2018. Happlia paid the costs of this reshipment. Happlia uses the specific identification inventory costing method.
Required:
- 1. In regard to the specific identification inventory costing method:
- a. Describe its key elements.
- b. Discuss why it is appropriate for Happlia to use this method.
- 2. a. What general criteria should Happlia use to determine inventory carrying amounts at December 31, 2018?
b. Give four examples of costs included in these inventory carrying amounts.
- 3. What costs should be reported in Happlia’s 2018 income statement? Ignore lower of cost or market considerations.
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Chapter 8 Solutions
INTERMEDIATE ACCOUNTING RMU 9TH EDITION
- Problem 6-2AA (Static) Periodic: Alternative cost flows LO P3 [The following information applies to the questions displayed below.] Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March Date March 1 March S March 9 March 18 March 25 March 29 Activities Beginning inventory Purchase Sales Purchase Purchase Sales Totals Sales Less: Cost of goods sold Gross profit $ $ FIFO For specific identification, units sold include 80 units from beginning inventory, 340 units from the March 5 purchase, 40 units from the March 18 purchase, and 120 units from the March 25 purchase. 50,900 $ Units Acquired at Cost 100 units@ $50 per unit 400 units @ $55 per unit Problem 6-2AA (Static) Part 4 4. Compute gross profit earned by the company for each of the four costing methods. Note: Round your average cost per unit to 2 decimal places and final answers to nearest whole dollar. 50,900 $ 120 units@ $60 per unit 200 units@ $62 per unit…arrow_forwardProblem 6-2AA (Static) Periodic: Alternative cost flows LO P3 [The following information applies to the questions displayed below.] Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March. Date March 1 Activities Beginning inventory March 5 Purchase March 9 Sales March 18 Purchase March 25 Purchase March 29 Sales: Totals Units Acquired at Cost 100 units @$50 per unit 400 units @$55 per unit 120 units @$60 per unit 200 units @$62 per unit Units Sold at Retail 420 units @ $85 per unit 160 units $95 per unit 820 units 580 units For specific identification, units sold include 80 units from beginning inventory, 340 units from the March 5 purchase, 40 units from the March 18 purchase, and 120 units from the March 25 purchase. Problem 6-2AA (Static) Part 4 4. Compute gross profit earned by the company for each of the four costing methods. Note: Round your average cost per unit to 2 decimal places and final answers to…arrow_forwardExercise 9-03 X Your answer is incorrect. Try again. Whispering Company follows the practice of pricing its inventory at LCNRV, on an individual-item basis. Estimated Cost to Complete and Sell Cost Item No. Quantity per Unit Selling Price 1320 1,500 $3.55 $5.00 $1.78 1333 1,200 3.00 3.77 1.11 1426 1,100 5.00 5.55 1.55 1437 1,300 4.00 3.55 1.50 1510 1,000 2.50 3.61 1.55 1522 800 3.33 4.33 0.89 1573 3,300 2.00 2.78 1.33 1626 1,300 5.22 6.66 1.67 From the information above, determine the amount of Whispering Company inventory. The amount of Whispering Company's inventory 45,369arrow_forward
- Exercise 9-03 X Your answer is incorrect. Try again. Whispering Company follows the practice of pricing its inventory at LCNRV, on an individual-item basis. Estimated Cost to Complete and Sell Cost Item No. Quantity per Unit Selling Price 1320 1,500 $3.55 $5.00 $1.78 1333 1,200 3.00 3.77 1.11 1426 1,100 5.00 5.55 1.55 1437 1,300 4.00 3.55 1.50 1510 1,000 2.50 3.61 1.55 1522 800 3.33 4.33 0.89 1573 3,300 2.00 2.78 1.33 1626 1,300 5.22 6.66 1.67 From the information above, determine the amount of Whispering Company inventory. The amount of Whispering Company's inventory Click if you would like to Show Work for this question: Open Show Workarrow_forwardRequired information Problem 5-1A (Algo) Perpetual: Alternative cost flows LO P3 [The following information applies to the questions displayed below.] Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March. Date March 1 March 5 March 9 March 18. March 25 March 29 Gross Margin Sales Less: Cost of goods sold Gross profit Beginning inventory Purchase Sales Purchase Purchase. Activities Sales Totals $ $ FIFO Problem 5-1A (Algo) Part 4 4. Compute gross profit earned by the company for each of the four costing methods. For specific identification, units sold include 120 units from beginning inventory, 250 units from the March 5 purchase, 100 units from the March 18 purchase, and 140 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.) 40,570 $ 25.220 15,350 $ Units Acquired at Cost 210 units @ $53.20 per unit 280 units $58.20 per unit LIFO…arrow_forwardExercise 5-3A (Algo) Allocating product cost between cost of goods sold and ending inventory: multiple purchases LO 5-1 Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 110 units at $105 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 222-unit purchase at $119 per unit; the second was a 260-unit purchase at $126 per unit. During the period, it sold 366 chairs. Required a-1. Determine the amount of product costs that would be allocated to cost of goods sold, assuming that Cortez uses FIFO. a-2. Determine the amount of product costs that would be allocated to ending inventory, assuming that Cortez uses FIFO. b-1. Determine the amount of product costs that would be allocated to cost of goods sold, assuming that Cortez uses LIFO. b-2 Determine the amount of product costs that would be allocated to ending inventory, assuming that Cortez uses LIFO. c. Determine the amount of product costs that…arrow_forward
- Required information Problem 5-2AA (Static) Periodic: Alternative cost flows LO P3 [The following information applies to the questions displayed below.] Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March. Date March 1 March 5 March 9 March 18 March 25 March 29 Activities Beginning inventory Purchase Sales Purchase Purchase Sales Totals Units Acquired at Cost @$50 per unit @ $55 per unit Problem 5-2AA (Static) Part 3 100 units 400 units 120 units 200 units 820 units @$60 per unit @ $62 per unit Units Sold at Retail 420 units @ $85 per unit 160 units @ $95 per unit 580 units For specific identification, units sold include 80 units from beginning inventory, 340 units from the March 5 purchase, 40 units from the March 18 purchase, and 120 units from the March 25 purchase. 3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round your…arrow_forwardExercise 5-3A (Algo) Allocating product cost between cost of goods sold and ending inventory: multiple purchases LO 5-1 Cortez Company sells chairs that are used at computer stations. Its beginning inventory of chairs was 70 units at $30 per unit. During the year, Cortez made two batch purchases of this chair. The first was a 162-unit purchase at $34 per unit; the second was a 200-unit purchase at $36 per unit. During the period, it sold 276 chairs. Required Determine the amount of product costs that would be allocated to cost of goods sold and ending inventory, assuming that Cortez uses: a. FIFO. b. LIFO. c. Weighted average. Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 Req C Determine the amount of product costs that would be allocated to cost of goods sold, assuming that Cortez uses FIFO. Total FIFO Units @ @ @ Unit Cost 0arrow_forwardProblem 1-25A (Algo) Using JIT to reduce inventory holding costs LO 1-5 Solomon Manufacturing Company obtains its raw materials from a variety of suppliers. Solomon's strategy is to obtain the best price by letting the suppliers know that it buys from the lowest bidder. Approximately four years ago, unexpected increases in demand resulted in materials shortages. Solomon was unable to find the materials it needed even though it was willing to pay premium prices. Because of the lack of raw materials, Solomon was forced to close its manufacturing facility for two weeks. Its president vowed that her company would never again be at the mercy of its suppliers. She immediately ordered her purchasing agent to perpetually maintain a one-month supply of raw materials. Compliance with the president's orders resulted in a raw materials inventory amounting to approximately $1,690,000. Warehouse rental and personnel costs to maintain the inventory amounted to $7,500 per month. Solomon has a line of…arrow_forward
- Exercise 9-03 X Your answer is incorrect. Try again. Whispering Company follows the practice of pricing its inventory at LCNRV, on an individual-item basis. Cost to Complete and Sell Cost Estimated Item No. Quantity per Unit Selling Price 1320 1,500 $3.55 $5.00 $1.78 1333 1,200 3.00 3.77 1.11 1426 1,100 5.00 5.55 1.55 1437 1,300 4.00 3.55 1.50 1510 1,000 2.50 3.61 1.55 1522 800 3.33 4.33 0.89 1573 3,300 2.00 2.78 1.33 1626 1,300 5.22 6.66 1.67 From the information above, determine the amount of Whispering Company inventory. The amount of Whispering Company's inventory 26,783 Click if you would like to Show Work for this question: Open Show Workarrow_forwardProblem 6-6A Alternative cost flows-perpetual LO2, 3 Case Defence sells smartphone cases and uses the perpetual inventory system. The following is information on the purchases and sales of "Defender Box" cases. On October 1, Case Defence had 28 units with a unit cost of $22. Date Oct. 3 Oct. 6 Oct. 12 Oct. 19 Oct. 23 Oct. 30 Oct. 31 Units Unit Cost 18 28 38 23 Purchases Required 1. Calculate the dollar value of cost of goods sold and ending inventory for the month of October using the following methods. a. FIFO b. Moving weighted average. Round all unit costs to two decimal places and round all other numbers to the nearest dollar. 2. Using the calculations in Part 1, complete the following table: Sales. Cost of goods sold. Gross profit... 23 25 27 28 3. Does using FIFO or moving weighted average produce a. A higher gross profit? b. A higher ending inventory balance? 4. Calculate the gross profit percentage for FIFO and moving weighted average for the month of October. Round to the…arrow_forwardQuestion 1 of 6View PoliciesCurrent Attempt in ProgressThe following are selected transactions of Kingbird Company. Kingbird sells in large quantities to other companies and also sells itsproduct in a small retail outlet.March 131531-/1 = :Sold merchandise on account to Dodson Company for $10,600, terms 2/10, n/30.Dodson Company returned merchandise with a sales price of $600 to Kingbird.Kingbird collected the amount due from Dodson Company from the March 1 sale.Kingbird sold merchandise for $600 in its retail outlet. The customer used his Kingbird credit card.Kingbird added 2.0% monthly interest to the customer's credit card balance.Prepare journal entries for the transactions above. (Ignore cost of goods sold entries and explanations.) (Credit account titles areautomatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
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