Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 9, Problem 9.10P
Dollar-value LIFO retail method
• LO9–5
[This is a variation of P 9–9, modified to focus on the dollar-value LIFO retail method.] Smith-Kline Company maintains inventory records at selling prices as well as at cost. For 2018, the records indicate the following data:
| ($ in thousands) | ||
| Cost | Retail | |
| Beginning inventory | $ 80 | $ 125 |
| Purchases | 671 | 1,006 |
| Freight-in on purchases | 30 | |
| Purchase returns | 1 | 2 |
| Net markups | 4 | |
| Net markdowns | 8 | |
| Net sales | 916 | |
Required:
Assuming the price level increased from 1.00 at January 1 to 1.10 at December 31, 2018, use the dollar-value LIFO retail method to approximate cost of ending inventory and cost of goods sold.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
E8.8 (LO 2) (Purchases Recorded, Gross Method) Cruise Industries purchased $10,800 of merchandise on February 1, 2020, subject to a trade discount of 10% and with credit terms of 3/15, n/60. It returned $2,500 (gross price before trade or cash discount) on February 4. The invoice was paid on February 13.
Instructions
a. Assuming that Cruise uses the perpetual method for recording merchandise transactions, record the purchase, return, and payment using the gross method.
b. Assuming that Cruise uses the periodic method for recording merchandise transactions, record the purchase, return, and payment using the gross method.
c. At what amount would the purchase on February 1 be recorded if the net method were used?
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.
P8.6 (LO 3) (Compute FIFO, LIFO, Average-Cost—Periodic and Perpetual)
Ehlo Company is a multi product firm. Presented below is information concerning one of its products, the Hawkeye.Date Transaction Quantity Price/Cost1/1 Beginning inventory 1,000 $122/4 Purchase 2,000 182/20 Sale 2,500 304/2 Purchase 3,000 2311/4 Sale 2,200 33Instructions
Compute ending inventory AND cost of goods sold, assuming Ehlo uses:
a. Periodic system, FIFO cost flow.
b. Perpetual system, FIFO cost flow.
c. Periodic system, LIFO cost flow.
d. Perpetual system, LIFO cost flow.
e. Periodic system, weighted-average cost flow.
f. Perpetual system,…
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 - It is discovered in 2018 that ending inventory in...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 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Dollar-value LIFO retail LO95 This exercise is a...Ch. 9 - Change i n inventory costing methods LO96 In...Ch. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Inventory error LO97 In 2018, Winslow...Ch. 9 - Inventory error LO97 Refer to the situation...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 net realizable value LO91 Tatum...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 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.8ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.10ECh. 9 - Gross profit method LO92 Royal Gorge Company uses...Ch. 9 - Prob. 9.12ECh. 9 - Retail inventory method; average cost LO93 San...Ch. 9 - Prob. 9.14ECh. 9 - Retail inventory method; LIFO LO93 Crosby Company...Ch. 9 - Prob. 9.16ECh. 9 - Conventional retail method; employee discounts ...Ch. 9 - Retail inventory method; solving for unknowns ...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Prob. 9.20ECh. 9 - Dollar-value LIFO retail LO95 Lance-Hefner...Ch. 9 - Prob. 9.22ECh. 9 - Change in inventory costing methods LO96 In 2018,...Ch. 9 - Prob. 9.24ECh. 9 - Error correction; inventory error LO97 During...Ch. 9 - Prob. 9.26ECh. 9 - Inventory error LO97 In 2018, the internal...Ch. 9 - Inventory errors LO97 In 2018, the controller of...Ch. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.30ECh. 9 - Prob. 9.31ECh. 9 - Lower of cost or net realizable value LO91 Decker...Ch. 9 - Prob. 9.2PCh. 9 - Lower of cost or market LO91 Forester Company has...Ch. 9 - Prob. 9.4PCh. 9 - Prob. 9.5PCh. 9 - Prob. 9.6PCh. 9 - Retail inventory method; conventional and LIFO ...Ch. 9 - Prob. 9.8PCh. 9 - Prob. 9.9PCh. 9 - Dollar-value LIFO retail method LO95 [This is a...Ch. 9 - Dollar-value LIFO retail LO95 On January 1, 2018,...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Retail inventory method; various applications ...Ch. 9 - Prob. 9.14PCh. 9 - Inventory errors LO97 You have been hired as the...Ch. 9 - Inventory errors LO97 The December 31, 2018,...Ch. 9 - Integrating problem; Chapters 8 and 9; inventory...Ch. 9 - Purchase commitments Appendix In November 2018,...Ch. 9 - Judgment Case 91 Inventoriable costs; lower of...Ch. 9 - Integrating Case 93 FIFO and lower of cost or net...Ch. 9 - Prob. 9.4BYPCh. 9 - Prob. 9.5BYPCh. 9 - Prob. 9.6BYPCh. 9 - Prob. 9.7BYPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9BYPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Ethics Case 911 Overstatement of ending inventory ...Ch. 9 - Analysis Case 912 Purchase commitments Appendix...Ch. 9 - Continuing Cases Target Case LO93, LO94, LO95...Ch. 9 - Prob. 1CCIFRS
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- E8.2 (LO 2) (Inventoriable Goods and Costs) In your audit of Jose Oliva Company, you find that a physical inventory on December 31, 2020, showed merchandise with a cost of $441,000 was on hand at that date. You also discover the following items were all excluded from the $441,000. 1. Merchandise of $61,000 which is held by Oliva on consignment. The consignor is the Max Suzuki Company. 2. Merchandise costing $38,000 which was shipped by Oliva f.o.b. destination to a customer on December 31, 2020. The customer was expected to receive the merchandise on January 6, 2021. 3. Merchandise costing $46,000 which was shipped by Oliva f.o.b. shipping point to a customer on December 29, 2020. The customer was scheduled to receive the merchandise on January 2, 2021. 4. Merchandise costing $83,000 shipped by a vendor f.o.b. destination on December 30, 2020, and received by Oliva on January 4, 2021. 5. Merchandise costing $51,000 shipped by a vendor f.o.b. shipping point on December 31,…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_forwardP8.6 (LO 3) (Compute FIFO, LIFO, Average-Cost—Periodic and Perpetual) Ehlo Company is a multi product firm. Presented below is information concerning one of its products, the Hawkeye. Date Transaction Quantity Price/Cost 1/1 Beginning inventory 1,000 $12 2/4 Purchase 2,000 18 2/20 Sale 2,500 30 4/2 Purchase 3,000 23 11/4 Sale 2,200 33 Instructions Compute ending inventory AND cost of goods sold, assuming Ehlo uses: Perpetual system, LIFO cost flow. Periodic system, weighted-average cost flow. Perpetual system, moving-average cost flow.arrow_forward
- E9.14B (L0 4) (Gross Profit Method) Wineview Company lost most of its inventory in a fire in December just before the yearend physical inventory was taken. The corporation’s books disclosed the following. Beginning inventory $210,000 Sales $970,000 Purchases for the year 805,000 Sales returns 71,000 Purchase returns 15,000 Rate of gross margin on net sales 20% Merchandise with a selling price of $51,000 remained undamaged after the fire. Damaged merchandise with an original selling price of $25,000 had a net realizable value of $2,500. Instructions Compute the amount of the loss as a result of the fire, assuming that the company had no insurance coverage.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_forwardE9.23 (LO 6 ) (Analysis of Inventories) The financial statements of ConAgra Foods, Inc.'s 2017 annual report disclose the following information. (in millions) 2017 2016 2015 Year-end inventories $934.2 $1,044.1 $1,642.6 Fiscal Year 2017 2016 Net sales $7,826.9 $8,664.1 Cost of goods sold 5,484.8 6,234.9 Net income 648.0 (665.9) Instructions Compute ConAgra's (a) inventory turnover and (b) the average days to sell inventory for 2017 and 2016.arrow_forward
- E6.14 (LO 3), AP Deere & Company is a global manufacturer and distributor of agricultural, construction, and forestry equipment. The company reports inventory and cost of goods sold using the LIFO method. Suppose it reported the following information in its 2025 annual report. (in millions) 2025 2024 Inventories (LIFO) $2,397 $3,042 Current assets 30,857 Current liabilities 12,753 1,367 16,255 LIFO reserve Cost of goods sold Instructions a. Compute Deere's inventory turnover and days in inventory for 2025. (Round inventory turnover to 2 decimal places.) b. Compute Deere's current ratio using the 2025 data as presented, and then again after adjusting for the LIFO reserve. c. Comment on how ignoring the LIFO reserve might affect your evaluation of Deere's liquidity. Idi bried FIEO LIFO and average cost and evaluate impact on gross profilarrow_forwardNOTE: Please do as Part A: Periodic direct method and Part B: Perpetual Allowance methods. the direction is not the same as text book. P9.3 (LO 1) (LCNRV–Cost-of-Goods-Sold and Loss) Malone Company determined its ending inventory at cost and at LCNRV at December 31, 2020, December 31, 2021, and December 31, 2022, as shown below. Cost NRV 12/31/20 $650,000 $650,000 12/31/21 780,000 712,000 12/31/22 905,000 830,000 Instructions a. Prepare the journal entries required at December 31, 2021, and at December 31, 2022, assuming that a perpetual inventory system and the cost-of-goods-sold method of adjusting to LCNRV is used. b. Prepare the journal entries required at December 31, 2021, and at December 31, 2022, assuming that a perpetual inventory is recorded at cost and reduced to LCNRV using the loss method.arrow_forward20.Pomelo Company has the policy of valuing inventory at the lower of cost and net realizable value using the allowance method. Allowance to Reduce Inventory to NRV account at December 31, 2021 before adjustment is P86,000. Analysis of the net realizable value and costs of their products on December 31, 2021 revealed a valuation at the lower of cost and net realizable value of P1,200,000 applied to the individual products. The total cost of its products on that date is P1,300,000.How much is the loss from decline in NRV that Pomelo Company should report in profit or loss for the year ended December 31, 2021?arrow_forward
- 46. What would the amount of cost of sales be in the following scenario? Purchases returns, R8 000; Freight costs, R4 800; Sales, R320 000; Closing inventory, R25 000; Purchases, R40 000 and Opening inventory, R25 000. A. R32 000 B. R36 800 C. R40 000 D. R283 200arrow_forward15.ABC Store purchased P100,000 from XYZ Supplies on July 1, 20X1. Terms: 5%, 3%, 2/15, n/30. FOB Shipping point, freight prepaid. Shipping costs was P2,000. Insurance for the shipment was P500 and non refundable tax was P1,000. At what amount should ABC recognize as cost of the inventory under the net method? 91,807 93,807 93,650 95,650arrow_forwardProblem 9-13 (Algo) Retail inventory method; various applications [LO9-3, 9-4, 9-5] Skip to question [The following information applies to the questions displayed below.] On January 1, 2021, Pet Friendly Stores adopted the retail inventory method. Inventory transactions at both cost and retail, and cost indexes for 2021 and 2022 are as follows: 2021 2022 Cost Retail Cost Retail Beginning inventory $ 162,500 $ 250,000 Purchases 800,000 1,084,000 $ 680,000 $ 1,063,000 Purchase returns 7,000 12,150 2,000 4,300 Freight-in 12,500 2,000 Net markups 6,900 11,800 Net markdowns 4,750 8,000 Net sales to customers 950,000 722,000 Sales to employees (net of 25% discount) 22,500 22,500 Normal spoilage 4,200 6,900 Price Index: January 1, 2021 1.00…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
INVENTORY & COST OF GOODS SOLD; Author: Accounting Stuff;https://www.youtube.com/watch?v=OB6RDzqvNbk;License: Standard Youtube License