INTERMEDIATE ACCOUNTING
10th Edition
ISBN: 9781264023356
Author: SPICELAND
Publisher: MCG
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Chapter 9, Problem 2CCTC
To determine
LCM (Lower of Cost or Market) approach: It is an approach that values the inventory at historical cost or lesser than the market replacement cost. The replacement cost refers to the amount that could be realized from the sale of the inventory.
NRV (Net Realizable Value): It refers to an estimated selling price that a company expects to collect in the form of cash from the customers by the sale of inventory. The value is reduced by the expected cost of completion, disposal and transportation. Sales commission and shipping costs also included in the predictable cost.
To Explain: whether LCM approach used by Company A to value its inventory differ from GAAP (Generally Accepted Accounting Principles).
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Exercise 5-13 (Algo) Compare the allowance method and the direct write-off method (LO5-6)
At the beginning of 2024, Best Heating & Air (BHA) has a balance of $24,900 in accounts receivable. Because BHA is a privately
owned company, the company has used only the direct write-off method to account for uncollectible accounts. However, at the end of
2024, BHA wishes to obtain a loan at the local bank, which requires the preparation of proper financial statements. This means that
BHA now will need to use the allowance method. The following transactions occur during 2024 and 2025.
1. During 2024, install air conditioning systems on account, $179,000.
2. During 2024, collect $174,000 from customers on account.
3. At the end of 2024, estimate that uncollectible accounts total 10% of ending accounts receivable.
4. In 2025, customers' accounts totaling $2,100 are written off as uncollectible.
Required:
1. Record each transaction using the allowance method.
2. Record each transaction using…
Exercise 8-21 (Algo) Supplemental LIFO disclosures; LIFO reserve; Amerisource Bergen [LO8-6]
AmerisourceBergen is an American drug wholesale company. The company uses the LIFO inventory method for external reporting but
maintains its internal records using FIFO. The following information was included in a recent annual report:
Inventories are comprised of the following ($ in millions):
September
30, 2017
$14,328
Inventories (under FIFO)
Less: LIFO reserve
Inventories (under LIFO)
Required 1
The company's income statements reported cost of goods sold of $149,998 million for the year ended September 30, 2017.
Required:
1. Prepare the September 30, 2017, adjusting entry to record the cost of goods sold adjustment.
2. If AmerisourceBergen had used FIFO to report its inventories, what would cost of goods sold have been for the quarter ended
September 30, 2017?
Required 2
(1,665)
Complete this question by entering your answers in the tabs below.
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$12,663
Journal entry…
Chapter 9 Solutions
INTERMEDIATE ACCOUNTING
Ch. 9 - Explain the (a) lower of cost or net realizable...Ch. 9 - What are the various levels of aggregation to...Ch. 9 - Describe the alternative approaches for recording...Ch. 9 - Explain the gross profit method of estimating...Ch. 9 - The Rider Company uses the gross profit method to...Ch. 9 - Explain the retail inventory method of estimating...Ch. 9 - Both the gross profit method and the retail...Ch. 9 - Define each of the following retail terms: initial...Ch. 9 - Explain how to estimate the average cost of...Ch. 9 - Prob. 9.10Q
Ch. 9 - Explain the LIFO retail inventory method.Ch. 9 - Discuss the treatment of freight-in, net markups,...Ch. 9 - Explain the difference between the retail...Ch. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Explain the accounting treatment of material...Ch. 9 - Identify any differences between U.S. GAAP and...Ch. 9 - (Based on Appendix 9) Define purchase commitments....Ch. 9 - (Based on Appendix 9) Explain how purchase...Ch. 9 - Lower of cost or net realizable value LO91 Ross...Ch. 9 - Lower of cost or net realizable value LO91 SLR...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.5BECh. 9 - Gross profit method; solving for unknown LO92...Ch. 9 - Retail inventory method; average cost LO93 Kiddie...Ch. 9 - Retail inventory method; LIFO LO93 Refer to the...Ch. 9 - Conventional retail method LO94 Refer to the...Ch. 9 - Conventional retail method LO94 Roberson...Ch. 9 - Lower of cost or net realizable value LO91 Herman...Ch. 9 - Lower of cost or net realizable value LO91 The...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.11ECh. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.1PCh. 9 - Prob. 9.3PCh. 9 - Prob. 9.8PCh. 9 - Prob. 9.1DMPCh. 9 - Prob. 9.3DMPCh. 9 - Prob. 9.4DMPCh. 9 - Prob. 9.5DMPCh. 9 - Prob. 9.6DMPCh. 9 - Prob. 9.7DMPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9DMPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Prob. 9.12DMPCh. 9 - Prob. 2CCTC
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