Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 8, Problem 8.7BE
Inventor y cost flow methods; perpetual system
• LO8–4
Refer to the situation described in BE 8–6. SAM uses a perpetual inventory system. Calculate ending inventory and cost of goods sold for January using (1) FIFO, and (2) average cost.
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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.
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.
EA5.
EA5. LO 10.2Akira Company had the following transactions for the month.Chart showing
Beginning Inventory of 150 units at $10 per unit,
Purchase of March 31 of 160 units at $12 each,
Purchase of October 15 of 130 units at $15 each,
and ending inventory of 50 units at a cost of ? each.Calculate the ending inventory dollar value for the period for each of the following cost allocation methods, using periodic inventory updating. Provide your calculations.
first-in, first-out (FIFO)last-in, first-out (LIFO)weighted average (AVG)
Chapter 8 Solutions
Intermediate Accounting
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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- Lower-of-cost-or-market inventory Data on the physical inventory of Katus Products Co. as of December 31 follows: Description Inventory Quantity Market Value per Unit (Net Realizable Value) A54 37 56 C77 24 178 F66 30 132 H83 21 545 K12 375 5 Q58 90 18 S36 8 235 V97 140 20 Y88 17 744 Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Description Last Purchases Invoice Next-to-the-Last Purchases Invoice Quantity Purchased Unit Cost Quantity Purchased Unit Cost A54 30 60 40 58 C77 25 174 15 180 F66 20 130 15 128 H83 6 547 15 540 K12 500 6 500 7 Q58 75 25 80 26 S36 5 256 4 260 V97 100 17 115 16 Y88 10 750 8 740 Instructions Determine the inventory at cost and also at the lower of cost or market, using the first-in, first-out method. Record the appropriate unit costs on the inventory sheet, and complete the pricing of the inventory. When there are two different unit costs applicable to an item, proceed as follows: 1. Draw a line through the quantity, and insert the quantity and unit cost of the last purchase. 2. On the following line, insert the quantity and unit cost of the next-to-the-last purchase. 3. Total the cost and market columns and insert the lower of the two totals in the LCM column. The first item on the inventory sheet has been completed as an example. Inventory Sheet December 31 Description Unit Inventory Quantity Cost per Unit Market Value per Unit(Net Realizable Value) Total Cost Market LCM A54 37 30 60 56 1,800 1,680 7 58 56 406 392 2,206 2,072 2,072arrow_forwardEA6. LO 10.2 Akira Company had the following transactions for the month. Number of Units cost per unit Beginning inventory 150 $1,500 Purchased Mar. 31 160 1,920 Purchased Oct. 15 130 1,950 Total goods available for sale 440 5,370 Ending inventory 50 ? Calculate the gross margin for the period for each of the following cost allocation methods, using periodic inventory updating. Assume that all units were sold for $25 each. Provide your calculations. A first-in, first-out (FIFO). B. last-in, first-out (LIFO) C. weighted average (AVG)arrow_forward6. Cypress Corp. uses dollar-value LIFO. Certain information follows:YearEnding InventoryCurrent Cost Index2004 $5,000 1002005 5,610 1012006 5,304 1022007 6,042 103Compute the ending 2007 inventory.a. $5,742b. $5,888c. $5,866d. $5,881 Please show work. Do not use excelarrow_forward
- pvn.4 The following information pertains to inventory for a company:March 1Beginning inventory = 32 units @ $5.60March 3Purchased 21 units @ 4.30March 9Sold 29 units @ 8.10What is the cost of goods sold, assuming the company uses LIFO? (Do not round your intermediate calculations. Round your answer to the nearest dollar amount.)arrow_forwardE8.12 (LO 3) (FIFO, LIFO, Average-Cost Inventory) Shania Twain Company was formed onDecember 1, 2019. The following information is available from Twain’s inventory records for Product BAP. Units Unit CostJanuary 1, 2020 (beginning inventory) 600 $ 8.00Purchases:January 5, 2020 1,200 9.00January 25, 2020 1,300 10.00February 16, 2020 800 11.00March 26, 2020 600 12.00 A physical inventory on March 31, 2020, shows 1,600 units on hand.InstructionsPrepare schedules to compute the ending inventory at March 31, 2020, under each of the following inventory methods.a. FIFO b. LIFO. c. Weighted-average (round unit costs to two decimal places)arrow_forwardH7. For the same transactions, why does the weighted-average cost method provide different value for ending inventory and COGS depending on whether the periodic or perpetual inventory system is used? Select one: a. Perpetual inventory calculates and assigns costs as items are sold, while periodic inventory calculates and assigns costs at the end of the period. b. Perpetual inventory calculates and assigns costs at the end of the period, while periodic inventory calculates and assigns costs as items are sold. c. Perpetual inventory counts all the purchases for the month first before calculating the average cost, while periodic calculates the average cost after every transaction. d. Perpetual inventory and periodic inventory will not provide different values using Explain also wrong options and explain with detailsarrow_forward
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