INTERMEDIATE ACCOUNTING COMBO
9th Edition
ISBN: 9781260361995
Author: SPICELAND
Publisher: MCG
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Textbook Question
Chapter 8, Problem 8.9BE
LIFO method
• LO8–4
AAA Hardware uses the LIFO method to value its inventory. Inventory at the beginning of the year consisted of 10,000 units of the company’s one product. These units cost $15 each. During the year, 60,000 units were purchased at a cost of $18 each and 64,000 units were sold. Near the end of the fiscal year, management is considering the purchase of an additional 5,000 units at $18. What would be the effect of this purchase on income before income taxes? Would your answer be the same if the company used FIFO instead of LIFO?
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Activities/Assessments:
Activity 9
Solve the following EOQ model problems:
1. Each year, Y Company purchases 20,000 units of an item that costs P 640 per unit.
The cost of placing an order is P 480, and the cost to hold the item in inventory for
one year is P 150.
a. Determine the EOQ.
b. What is the average inventory level, assuming that the minimum inventory level
is zero?
c. Determine the total annual ordering cost and the total annual holding cost for
the item if the EOQ is used.
2. A toy manufacturer uses approximately 32,000 silicon chips annually. The chips are
used at a steady rate during the 240 days the plant operates. Annual holding cost is
P27 per chip and ordering cost is P1,080. Lead time = 1 week.
a. Find the EOQ.
b. Find the reorder point.
c. What would be your ordering policy for this item?
d. Find the total annual cost of ordering and carrying silicon chips.
3. A large bakery buys sugar in 50-kg bags. The bakery uses an average of 1,344 bags
a year. Preparing an order…
PROBLEM 10
The inventory of Juan Company on December 31, 2020, consists of the following items:
Inventory No.
Quantity
Cost per Unit
NRV
A1001*
1,000
4,100
P56
P6
A1005
61
59
A1010
500
98
85
A1014
1,200
15
16
A1021
37
3,250
750
35
A1022
20
26
A1030
1,350
39
35
*Inventory A1001 is slow-moving and was acquired four years ago. It will be sold as scrap with a
realizable value of P6.00
Requirement:
1. Determine the valuation of the inventory as of December 31, 2020.
Exercise 8-15 (Algo) LIFO; perpetual system [LO8-1, 8-4]
Altira Corporation provides the following information related to its inventory during the month of August 2024:
August 1 Inventory on hand-3,600 units; cost $7.70 each.
August 8
Purchased 18,000 units for $7.10 each.
August 14
Sold 14,400 units for $13.60 each.
August 18 Purchased 10,800 units for $6.60 each.
August 25 Sold 13,400 units for $12.60 each.
August 28 Purchased 5,600 units for $5.80 each.
August 31 Inventory on hand-10, 200 units.
Using calculations based on a perpetual inventory system, determine the inventory balance Altira would report in its August 31, 2024,
balance sheet and the cost of goods sold it would report in its August 2024 income statement using last-in, first-out (LIFO).
Perpetual LIFO:
Beginning Inventory
Purchases:
August 8
August 18
August 28
Total
Cost of Goods Available for Sale
Cost
per
unit
3,600 $7.70 $
Number
of units
18,000 7.10
10,800
6.60
5,600
5.80
38,000
Cost of Goods
Available for Sale
$…
Chapter 8 Solutions
INTERMEDIATE ACCOUNTING COMBO
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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